Whether you own your own business, do freelance work, or drive for Uber, it is important for you to understand what to do when it comes to filing your taxes. Being your own boss means you also have to have control and knowledge of your finances and be able to stay compliant with the IRS. Being self-employed comes with a good deal of responsibility as well as special tax write offs. Here are a few tips to help you out if you are self-employed.
Who is self-employed?
To be considered self-employed, you must meet certain requirements. These include owning your own business, carrying on a trade or business as a sole proprietor or independent contractor, or being a member of a partnership for a trade or business.
What are your tax obligations as a self-employed?
As a self-employed individual, you are required to file an annual tax return and pay quarterly estimated tax payments. You are generally required to pay self-employment tax also known as SE Tax and income tax. SE Tax is the Social Security and Medicare tax for individuals that work for themselves. Most taxpayers have these taken out of their paycheck, but since you are self-employed, you must pay it separately. You can learn more about filing your tax return if you’re self-employed here.
What deductions can a self-employed take?
There are special deductions that a self-employed tax payer can take versus a W-2 taxpayer. Below are a few deductions that a self-employed can take!
Home Office- One of the most common deductions that a self-employed tax payer can take is your home office. If you are working from your home on a regular basis, you can claim a deduction on that space. Expenses that you can deduct could include a portion of the real estate tax, mortgage interest, rent, utilities, insurance, and repairs made on your house.
Mileage- As a self-employed worker you might use your car to meet up with clients or you’re a driver for Uber. Just remember to track the mileage that you use to meet with clients or when you’re driving for Uber. For every mile that you drive, you can claim 53.5 cents. Also, you can deduct the cost of parking and any tolls that you take. There are several apps out there to help track your mileage.
Business Trips- If you are traveling to another U.S. city for business, you can deduct 100% of the flight costs. You also are allowed to deduct up to 50% of your hotel and food expenses while you are working.
Part Time Hires- Hiring kids to help run deliveries, clean your office, answer phones and other miscellaneous items, you can deduct their wages on Schedule C. Just make sure you’re paying them fair wages for the work performed.
Being self-employed can be tricky on what you are supposed to pay and the deductions you can take. It might be best for you to hire a tax professional that can help you navigate the IRS and all the different taxes and tax deductions out there. Polston Tax helps small businesses and contractors every day. Our team of tax accountants and tax lawyers have studied the tax law and know how to keep you compliant with the IRS while maximizing your tax savings. Call us at 844-841-9857 or click below to schedule a free consultation!