When a person is self-employed, they have certain tax rules to follow that can make completion of income tax forms more complex. If one is a full-time freelancer, business owner or independent contractor, they are eligible for money-saving benefits and deductions. While some deductions are bigger than others, all are important and can be valuable. Tax preparation experts recommend the below tips for those who are self-employed.
Take Advantage of All Possible Tax Deductions
As a self-employed worker, one can deduct certain business expenses and reduce his or her tax liability for the entire year. For instance, if someone works from home, they can take a home office deduction, which provides a significant tax break. To simplify the process of getting ready for tax season, self-employed people should use tax preparation services in Rancho Mirage CA. A tax preparer can make it easy to deduct business expenses, travel costs and health insurance in many cases.
Use the Proper Tax Forms
A business’ earnings and/or its losses must be reported to the Internal Revenue Service using either Schedule C or the Schedule C-EZ tax form. The amount reported on the filer’s Form 1040 depends on his or her itemized expenses and operational income. If a person operates only one business, has expenses of less than $5000, has no employees and lacks inventory, they can use the Schedule C-EZ form.
Pay the Estimated Tax if Necessary
Self-employed people must pay taxes during the year via estimated payments if they owe more than $1000 at the time of the return’s filing. If the person does not pay a sufficient amount of taxes through estimated payments or withholdings, they could face serious penalties from the IRS. Visit their website or call tax preparation services in Rancho Mirage CA to find out about estimated tax payments.
Taxes are complicated, even under the best of circumstances, but they’re even more complex for self-employed people. If a freelancer or independent contractor in Rancho Mirage has questions or concerns, the team is happy to help. Call or visit us online to talk to a tax preparer about options for self-employed individuals.