The July 15th deadline for tax returns is upon us. Once you get your return in, it is most likely that the last thing you want to think about next year’s taxes. While that impulse is completely understandable, for you freelancers and independent contractors out there taxes are a consideration that does not come up only once a year. Rather, it is a year-round consideration.
There is no question that freelance work has become a way of life in Florida, and throughout the United States. The percentage of people who are self-employed has skyrocketed in the last ten years, and it is not slowing down. The income inequality in the country has, simply put, forced people to try to find innovative ways to make ends meet.
Thus, with many more people acting as their own boss with their own business – whether it is an online craft making company, or driving for a ride-share app – you need to look at your taxes as a business would. That means you need to start considering how you will deal with taxes, when they are not automatically taken out of your income as they would if you were a W-2 employee.
In this article, we will help you freelancers get a jump on next year’s taxes by discussing a number of tips that you need to keep in mind as you continue to earn income that is not immediately reported to the government through a company’s payroll system.
If, after reading this article, you would like to have additional information about how to deal with taxes as a freelancer or independent contractor, we invite you to call the business tax attorney of Florida, Mary E. King, P.L. The Law Office of Mary E. King, P.L. can make sure that your tax issues are resolved efficiently and at the lowest cost to you. Please fill out our online contact form, or call us at 941-906-7585 today.
1. Reporting Your Income
As a self-employed freelancer or independent contractor, you need to report your income, all of it. While many might feel temptation to not be quite so accurate because the income they make is otherwise hard to trace, underreporting is not a good idea. Stay above board, and you’ll never have to worry if you get audited.
That means that you need to gather all of your sources of income, which there may be many sources. That is common to most freelancers and independent contractors. A good deal of your income might be reported such that you will receive 1099-MISC forms in January.
2. Self-Employment Tax
For those of you who are used to being paid as a W-2 employee, you may not realize that your employer automatically pays your Social Security and Medicare taxes from you paychecks. Thus, as a W-2 employee, you do not need to worry about those taxes.
When you are your own boss, however, you need to make sure that you pay those taxes yourself. Both taxes, however, are typically combined into a 15.3% “self-employment tax.”
So, when you are taking in income as a freelancer, remember that you have to be concerned with that self-employment tax.
3. Business Expenses
Running your own business as a freelancer or independent contractor is great because there is that opportunity to deduct business expenses. We have all heard the stories of “business lunches” that are tax deductible. It all sounds rather fancy, but try to be careful in how you characterize your expenses.
The IRS typically permits only those ordinary and necessary expenses to operate your business for purposes of tax deductions. Here are a few categories that are typical deductible items for self-employed individuals:
2. Office expense
3. Necessary equipment and materials
4. Client lunches or dinners
A good rule of thumb is that if you have an expense that would exist regardless of whether you were in business for yourself, then that is not a deductible business expense.
4. The Home Office
It is entirely legitimate to write off rent, utilities, office equipment, and wifi expense for those portions of your home that you use as an office. That said, the office space must be used exclusively for self-employment work. If space is the living room, then you would not be able to write off the room 24-7 as a business expense.
5. Travel and Meals
You typically will be permitted to deduct the expense of traveling to a job for a client that is not your normal place of business. In other words, you cannot deduct the cost of commuting to your office. With regard to meals, you can deduct business meals with clients at a 50% rate. Note that you cannot write off a vacation as “business” travel.
Let an Experienced Business Tax Attorney in Florida Help You with Your Freelance Business
Taxes can be a challenge for freelancers because there is so much more self-reporting you need to manage. That could result in being an IRS target for an audit.
In the event of an audit, you need to talk to a business tax attorney in Florida who can help. Mary E. King has spent her career concentrating on tax law and can help you with tax audits in Florida and elsewhere. Attorney King has a wealth of information about what types of options would make the most sense for you and your business.
That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax-related issue – no matter how small or how large – setting up an initial consultation with Mary E. King, tax attorney of Florida, is the first step you should take towards relief.
The Law Office of Mary King P.L. offers complete IRS problem solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call us today to schedule an initial consultation. With years of experience as a tax attorney in Florida for many clients, Attorney Mary E. King can make sure that your tax issues are resolved in your favor. Fill out our online contact form, or call us at 941-906-7585. Remember, at the Law Office of Mary E. King, we are focused on solving your tax issues for good.