Did you know a recent survey found around 30% of Americans are self-employed?
If you want to become self-employed, you will need to learn how to file taxes properly. This is because when you’re self-employed, the way you file taxes is often different from how you’d approach things as an ’employee.’
Read on, and you’ll discover some self-employment tax tips that’ll help you do everything correctly. If you want to avoid mistakes when filing your taxes, these tips will help you avoid the big issues that catch most people out.
Do You Need to File Taxes?
To begin with, it’s worth identifying whether you need to file any taxes as a self-employed person.
Well, according to the IRS, you will need to file taxes if your self-employed income exceeds $400. Of course, if you’re full-time self-employed, your income will likely exceed this, so you will definitely need to file taxes.
Background Information on Filing Taxes
As a self-employed person, you will have to pay a federal, state, local, and self-employment tax. Furthermore, you’ll need to make tax payments every quarter, and there will be clear deadlines for when these payments need to be made.
It’s worth noting the amount of tax you pay is often influenced by the expenses you’re dealing with.
For instance, if you have a lot of expenses, you might be able to add some deductions to your tax bill. Note that certain ‘working from home expenses’ also exist, and so if you work from home, don’t think that you can’t include any expenses.
In any case, you should try to keep meticulous records so you can include these expenses when you’re filing your taxes. Having good records will also help if the IRS wants to audit your tax filings.
Working With a Professional
If you don’t have the time to learn how this all works, or you’re worried about making a mistake, you should work with an accountant.
With their help, you can make sure your taxes are filed properly, and this will then give you some peace of mind. An accountant will also be able to provide you with good suggestions as time goes on.
For instance, if you get lots of new work, your accountant may suggest adopting a different business structure.
So, this might mean you create a company, and you instead pay yourself a salary as a ‘W2’ employee. If you make this change, your accountant will help you create W2 forms for your company.
Will You Use These Self-Employment Tax Tips?
The self-employment tax tips mentioned in this post should help you if you’re looking to work for yourself.
If you doubt your ability to do things properly, you should definitely think about hiring an accountant. Of course, hiring an accountant can increase the overall costs you face as a self-employed person.
However, an accountant will also help you avoid any fines that might occur if you do things the wrong way. Due to this, you could argue that the cost of hiring an accountant is justified.
To get answers to your self-employment tax questions, read our article on the 13 commonly asked questions on SE tax.