Questions About Taxes You Must Know the Answers To

Tax Pitfalls to Avoid if You are Self Employed

We are living in a world that is constantly changing, and there is a rise in the international connectivity and high-quality consumer technology that has resulted in a rise in a gig economy. As a result, many people have taken their jobs in their hands and are now working for themselves.

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 just starting up, here are some common tax pitfalls that you must try to prevent.

Failing 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 Reaching Out for the Help You Require
As a freelancer, you must recognize the fact that time is money. Regardless of your reason for freelancing, it is advisable that you get the help of a professional to assist you with your tax matters to avoid overspending. If you find yourself reviewed, the most prudent investment that you could ever make is hiring a tax controversy attorney. Also, by entrusting your accounting and bookkeeping to a professional will save you time and money in the end.

Not Tracking Your Expenses
You do not want to spend the first week of April on your knees, sifting through loads of paperwork and tearing your hair out frustration. It is therefore essential to record your income and expenditure on a weekly or monthly basis.

It also means that you have to record your income-related expenses carefully. It is disturbing that up to 73% of freelancers fail to file their income-deductible expenses meaning that the IRS takes up a large slice of their income without the right proportion.

Having This is mind, it is vital that you know exactly what counts as a tax-deductible expense. If you use your vehicle to run your day-to-day business, you should be aware of the fact that the vehicle mileage, maintenance, repairs, and tax can qualify as deductibles. If on the other hand, you work from home, a portion of your rent or mortgage interests, property tax, and utilities can be deducted as can any expenses on computers and office supplies as well as the phone and internet use. Any money that is used in advertising and marketing, professional training and licensing to professional bodies are also deductible.

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