Conn. (WTNH) — Taxes are due tomorrow! If you’re scrambling to get yours done, after launching a new side hustle last year or freelancing, filing your taxes may present new challenges.
Being your own boss can come with perks, but also come with self-employment tax.
“That’s basically accounting for the fact that you’re not paying payroll taxes as a salaried employer or employee would,” Ted Rossman of Bankrate.com said.
The 15.3% self-employed tax includes your social security and Medicare taxes. And it’s on top of federal and state income taxes.
If you work for yourself, IRS Spokesman Luis Garcia said to consider paying your estimated taxes quarterly, using a 1040-ES form.
“If you let it get bigger and bigger and build up to a huge bill, that’s where you run into trouble,” Garcia said.
If you earned more than $600 from a side hustle or as a freelancer last year, you’re required to let the IRS know.
“Whether you receive a 1099 from the platform that you’re working with or not, you want to make sure that you report everything so that you’re paying the appropriate taxes,” Garcia said.
Tax deductions, like office supplies, the internet, and phone bills — are benefits for the self-employed, but they don’t apply if you work remotely for a company.
“You typically need to be a business owner a freelancer or a sole proprietor,” Rossman said. “That’s the kind of person who can take the home office deduction, not somebody who just happens to be skipping the commute and working for another company from home.”
Avoid audit “red flags,” like taking big deductions for meals, travel, and entertainment. Also, be sure all dedications are backed-up with well-documented receipts.
When you’re done filing, you want to hang onto that paperwork and contact information of whoever may be helping you file so you can turn to them for help if you happen to get audited.