Tax Tips For The Self-employed

For those who are self-employed, its common knowledge that working for yourself can be a great way to get ahead financially

. You can also be your own boss and have the freedom to make important decisions regarding your clients, work schedule and overall business operations. However, you also are probably all too aware that filing taxes as a self-employed person can be difficult. Whether you are an independent contractor, consultant or freelance writer, there are some things you should know in order to avoid setting off red flags with the Internal Revenue Service (IRS).

The first thing that you should know is that it's important to organize your independent or freelance income from other types. Keep track of all reported income, especially on Form 1099s. These are always reported to the IRS. Keep track of all business related expenses. This includes anything from repairs, legal expenses, advertising, supplies and anything else related to the operations of your business or service.

For example, if you get a website made or business cards printed in order to help promote what you do, keep track of those invoices. If you work from home, fill out Form 8829 so that you can calculate how much your home is used for business purposes and deduct that.

Set aside money throughout the year to pay money on your personal income from self-employment. You will typically be paying more than if you were employed through a company because an employer will pay part of your Social Security and Medicare taxes. Unfortunately, as a self-employed individual, you will be left with the burden of paying both sides of these taxes.

According to the IRS, your service or business should make a profit three out of every five years of operation in order to qualify for tax write-offs. If not, you will be required to prove that your business is viable. If you find yourself facing a tax audit or other problem, find a profession who understands the complexities of self-employment taxes.

by: Mark Randall

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