Tax Pitfalls to Avoid if You are Self Employed
With the world being in constant change, there is a rise in the international connectivity and high-quality tech which has led to a rise in a gig economy. This has seen many people brought their careers into their hands and started working for themselves in a variety of fields.
It is encouraging to see people take their entrepreneurial skills to an advanced level but it is frustrating that many of them are doing so without a clear idea of their tax obligations. If you are a beginner, it is essential that you avoid these common tax pitfalls.
Failure to Recognize Yourself as a Freelancer
Many people make money freelancing as a side gig alongside their day job and assume that because they are paying tax at work, they do not have to pay tax on their freelance wages. The truth is that such people have the same obligation as a full-time freelancer and must pay both the self-employment and income taxes.
Not Getting the Help You Need
Time is money mostly when you are a freelancer. Whether freelancing is your living, or you do it as a side gig, it is important to reach out to people who can offer assistance with your taxes and avoid overspending. Investing in tax controversy attorney could be the wisest decision to go especially if you find yourself reviewed. Also, by entrusting your accounting and bookkeeping to a professional will save you time and money in the end.
Failing to Track Your Expenses
Obviously nobody wants to start another financial year with disappointment by tracking to track their financial records without any success. To avoid such a scenario; you must ensure that you log your income and expenditure on a weekly or monthly basis.
It also means that you have to record your income-related expenses carefully. Most freelancers, up to 73% fail to declare their tax-deductible costs meaning that the IRS takes disproportionately a significant amount out of their income.
Having This is mind, it is vital that you know exactly what counts as a tax-deductible expense. If for instance, you use your car for everyday operation of your business, you need to be aware that the vehicle mileage, tax, repairs and maintenance, all qualify to be deductibles. When working from home, then a part of your rent or mortgage interest, property taxes, and utilities can be deducted, and the same applies to expenses on computers and office supplies. Additionally, any cash that is spent trying to acquire a license or registering to a professional body, advertising, and marketing or paying for vocational training or coaching is all deductible.