As a self-employed individual, you’re in a special tax situation. Instead of simply receiving a W-2 form, you’ll have significant document collection and several other factors to consider. What’s more, you may have a side gig that qualifies as self-employment (making $400 or more over the year), as well as a full time job, both of which you’ll need to report, of course. Either way, you can easily get a headstart on filing for your self-employment now to ensure accuracy, reduce stress, and maybe even your tax bill. Peruse our tips below!
Between receipts from expenses, invoices, and more, you’ll want to take your time organizing and crunching numbers while you wait for your 1099 to come in (you should expect it before January 31st). Remember to consider all deductions like home office, travel, and IRA contributions. After collecting and organizing everything you need (we recommend filing by month and type of document – ex.: June 2016 Home Office Receipts), make a timeline of each step you need to take in order to file, and you’ll be more than ready by April. You may even be compelled to file early and get that refund before the start of spring.
Speaking of deductions, now is the time to increase your tax write-offs by making any business-related purchases that you’ve been putting off or saving up for. You may need to upgrade your laptop and software, register for a class, or book travel to an industry convention. Doing so will not only prep you for a more successful 2017, it will increase the chances of a tax refund.
Some self-employed taxpayers must pay quarterly taxes instead of yearly. If you anticipate a tax bill of over $1,000 and your withholdings total less than 90% of the total federal tax you expect to pay at the end of the year, the IRS wants you to pay taxes quarterly. This is mutually beneficial if you end up going this route in 2017.
As the sole person responsible for your business, you are also solely responsible for filing taxes correctly. If you haven’t employed meticulous bookkeeping this year, make that a new year’s resolution to help you find the information you need in an organized manner. If things get complex, consider consulting a tax professional.
Sign up for our newsletter and be the first to find out when exciting IRS news happens. Yes, exciting. We're really into taxes.