Tax Pitfalls that You should Avoid if Your Work for Yourself
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
A lot of people make money through freelancing as a side gig, and tend to assume that since they are paying taxes at work, they don’t have to pay fee on their freelance payments. The truth of the matter is that these people have the same tax obligations as the full-time freelancer, and are, therefore, required to pay the income tax as well as the self-employment tax.
Not Reaching Out for the Help You Require
Time is money, especially when you freelance. 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. If you find yourself reviewed, the most prudent investment that you could ever make is hiring a tax controversy attorney. Also, entrusting you booking and accounting to professionals saves you cash and time.
Filure 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. Believe it or not, almost 73% of all freelancers fail to declare their income-deductible expenses leaving the IRS to take a sizeable bite out of their income disproportionately.
It is therefore vital that you know exactly what counts as a tax-deductible expense. If your daily business operations require the use of your vehicle, you need to beware that the mileage, maintenance and repairs, and taxes all qualify as deductibles. If you work from your home, a portion of your mortgage interests and rent, property taxes and utilities can be deducted as well as any expenditure on the office supplies, computers and on the internet and phone use. Any money that is used in advertising and marketing, professional training and licensing to professional bodies are also deductible.