Tax Pitfalls that You should Avoid if Your Work for Yourself
The world is changing and as such, there has been a rise of international connectivity and high-quality consumer tech giving rise to a gig economy. This has resulted in people taking their careers in the hands and working for themselves in various 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.
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 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 Getting the Needed Assistance
As a freelancer, you must recognize the fact that time is money. Whether you do freelance as your living or a lucrative sideline, it is crucial that you reach out to people who can assist you with your taxes to avoid overspending. Investing in tax controversy attorney could be the wisest decision to go especially if you find yourself reviewed. 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. It is important thus that you log your revenue and spending weekly or monthly.
You also have to ensure that you accurately log your income-related expenses. 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.
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.