4 tips for freelancers
There are many benefits to being self employed. Often, you will be able to set your own hours, work from any location, and take on projects that interest you. There are also tax benefits to being self-employed. But a potential downside is that the tax filing process can be trickier and cumbersome than if you’re a salaried employee. With that in mind, here are four tips for navigating the current tax season.
1. Start the process early
Your 2021 tax return, which is the return you file this year, is not due until April 18. But if you are self-employed, it pays to start working there well before that deadline. You may encounter different problems when you get your documentation in order, such as realizing that you are missing certain information that you need to complete your return. The earlier you start, the less stress you will have.
2. Make sure you have a clear idea of your income
It’s important to keep detailed records of your income when you’re self-employed, because depending on your situation, you may not have such an easy time reporting your income on your tax return. If you’re self-employed and got paid through a third-party platform like Upwork last year, you won’t receive a tax form summarizing your earnings unless you earned more than $20,000 and were paid more than 200 separate transactions.
When you sit down to file your tax return, go through your Bank account records carefully to make sure you are reporting every dollar to the IRS. Not reporting income could get you in trouble if the IRS checks your return.
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3. Know what expenses you can deduct
One of the benefits of being self-employed is that you are entitled to deduct business expenses you incur while working. If you used your car to visit clients, you can deduct the mileage. If you worked outside your home, you could be in line for a home office deduction. If you’re a writer who bought a new laptop or printer, those expenses are also generally deductible.
Go through your bank and credit card statements to see what you spent last year. Next, make a list of your deductions so you know what to claim.
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4. Get help
Since taxes become more complicated when you are self-employed, it may be advantageous to hire a tax professional rather than take care of your declaration yourself. A tax preparer may be able to help you identify expenses you didn’t know you could write off, to the point where the money that person saves you pays for their fees.
But if you’re going to hire someone for tax help, don’t wait. Tax preparers tend to book up as the season progresses, so you better make calls now, before you lose that option or get stuck paying for someone with a higher fee. .
Filing tax returns when you’re self-employed isn’t always terribly difficult, but it can be a lengthy and somewhat daunting process. Use these four tips to get organized and avoid unnecessary stress as you tackle your 2021 return.
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