Today, we have a guest post from Brian Rodriguez of our sister company, Freedom Tax Relief.
“Being self-employed can be a blessing, but having to keep track of your own income and tax liabilities can sometimes be a challenge. Often times, I find that individuals who earn income from 1099s end up needing to pay large tax amounts. It is very easy to use 100% of the income earned to cover monthly expenses and forget about your favorite uncle…Uncle Sam.
Here are four tips that will help you ease your burdens when earning non-taxable income such as 1099s.
#1 – Claim your deductions.
There is a saying, “It takes money to make money.” This is very true when self-employed. Think of all the costs in your daily life: gas, food, mobile phone, utilities, insurance…you get the idea. Keep track of these expenses and ALWAYS keep good records. By leveraging these costs, you can lower your taxable income and end up with less tax burdens.
#2 – Keep your business finances and personal finances separate.
If you are a business owner, it is crucial to stay organized. By keeping your business and personal finances separate, you will lower your chances of incorrectly tracking expenses for your business. It will also make it easier for you to provide supporting data if audited by the IRS.
#3 – Open a business checking or savings account.
Using a business checking account just for your taxes will allow you to set up an automatic transfer of 15 to 30%. You can use it to pay off any tax liabilities at the end of the year. Since it is automatic, it will be one less thing you’ll have to worry about.
#4 – Don’t forget about self-employment tax.
If you are self-employed and have net earnings of $400 or more, you must pay self-employment (SE) tax. There is an exception (if you earn income as part of a religious order), but everyone else must pay. There are penalties if you fail to pay these taxes, and they are set up to cover social security and Medicare. This is titled as Schedule SE (Form 1040).
For more information on taxes, check out our sister company, Freedom Tax Relief, and speak to one our tax debt specialists.”
– Brian Rodriguez