19 Apr Tax Documentation Tips if You’re Self Employed
Tax Documentation: What if You’re Self-Employed?
Tax documentation can be pretty difficult, and if you’re self-employed it can be especially overwhelming. Of course, the first year is always the most difficult, and as you pick up some tax tips and information along the way, it’ll be easier and less intimidating. In today’s blogs, we’ll discuss some tax documentation tips for the self-employed.
Make Sure You’re Paying Self-Employment Taxes
First things first: if you’re self-employed, you need to be paying self-employment taxes. This includes both Social Security and Medicare. These taxes will be based on your net earnings, so make sure you accurately calculate them and figure out the percentage that needs to be paid. Once you find out how much you owe, make sure you’re ready for the payment due dates and that you make your payments on time. Self-employed people need to pay quarterly estimated tax payments. If you’re missing these payments, it could end up being really troublesome when tax season comes around.
Make Sure You’re Making Deductions Everywhere You Can
Business deductions are a common way to lower your tax bill. This is especially the case if you’re self-employed. This is where the intense tax documentation comes into play. You should be recording each and every business deduction you can think of in order to benefit the most when you file your taxes. As long as a deduction can be considered ordinary and necessary for your business, you can write it off. For the self-employed this means:
- Using Your Home as Your Business(i.e. Rent, Utilities, Internet, etc.)
- Using your car
- Property depreciation
- Educational expenses
- IRA Contributions
- Health Insurance Premiums
Since self-employed people work from home, they can actually write off a lot of their bills as deductions. Keep in mind, this doesn’t mean you can deduct everything. Only when you use it for business. For instance, rent would have to be prorated. Meaning, if you work 40 hours, a week, find out how much rent costs for 40 hours. That’s how much you can deduct for that week. Of course, you can compile this into a quarterly amount, but you get the point.
Consult with Tax Documentation Experts
If you’re self-employed, you’re probably plenty busy already. That’s why your best and simplest course of action is to hire a professional to help you with your tax documentation. They can make sure you’re itemizing all your deductions throughout the year, help you pay your taxes on time, and generally make your life easier. For more information about how we can help you with your tax documentation needs, contact Jeff Pickering, CPA today and schedule an appointment.