Tax Tips For The Self-Employed
If you are self-employed, you probably already know that its a fantastic way to get ahead financially. You also have the freedom to be your own boss and make decisions regarding your business operations, clients and work schedule. However, you also probably know that filing taxes as a self-employed individual is much more difficult. Whether you are a freelance writer, consultant or independent contractor, there are a few things that you should be aware of in order to avoid setting off red flags to the Internal Revenue Service (IRS).
The first thing that you should know is that it's important to organize your independent or freelance income from other types. Keep track of all reported income, especially on Form 1099s. These are always reported to the IRS. Keep track of all business related expenses. This includes anything from repairs, legal expenses, advertising, supplies and anything else related to the operations of your business or service.
For instance, if you have a website developed or business cards printed to promote what you do, keep record of those work orders and invoices. Next, if you work out of your home, make sure you fill out Form 8829 in order to calculate how much of your home is used for business purposes.
You should also make sure that you set aside money to pay taxes on your personal income from self-employment. Typically you will be paying more since normally; an employer will be paying part of your Social Security and Medicare taxes. However, as a self-employed person, you act as both employee and employer and will thus have to pay both sides of those taxes.
According to the IRS, your service or business should make a profit three out of every five years of operation in order to qualify for tax write-offs. If not, you will be required to prove that your business is viable. If you find yourself facing a tax audit or other problem, find a profession who understands the complexities of self-employment taxes.
If you are facing an IRS audit or have other tax problems, contact the experts at Guardian Tax Resolutions today by visiting GuardianTaxResolutions.com for a free consultation and quote.
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