Keeping track of income and expenses is essential, even if you don't own a business. And if you do own a business, things get even more complicated. There are paychecks to issue, taxes to track, and subcontractors to pay out. All of these details are a whole lot less challenging when you hire an accountant to oversee them. However, it is still important to know a little bit about accounting yourself. Dig into the articles on this website, and you'll gain a better understanding of accounting principles, what services accountants really offer, and the benefits of hiring these professionals to assist with your finances.
As a contractor or freelancer, you do have some freedom to pick and choose the jobs you want to take on, and maybe you can even set your own schedule. While this line of work definitely has its perks, it may also come with some additional considerations when it comes to tax preparation. If you want to make sure that you get your taxes in on time while reporting everything as accurately as possible, here are some tips that might help.
Keep Receipts for Absolutely Everything
As a contractor or freelancer, you have to pay tax on your total income after expenses. Far too many freelancers though don't bother saving receipts for smaller expenses. Over the course of an entire year, those smaller expenses could really add up. It doesn't matter if you only spent a couple of dollars on a new pack of pens, save the receipt and add it to your stash. Tally up every single business expense you have throughout the year and you may be surprised at not only how much you spent but how much you can then also deduct from your income when it's time to pay your taxes.
Don't Cheat, It's Not Worth It
As a freelancer, you know that IRS rules state that you will get a 1099 form from any business or job where you earned $600 or more during the past year. The business will also report this income directly to the IRS. Businesses that have paid you less than $600 throughout the year don't have to send a 1099 or report it to the IRS, and so you might be thinking that you can get away without reporting it as well. After all, a freelancer with multiple jobs might have quite a few contracts where their total income for the year was $599.99 or less. All of that income can really add up if you don't have to report it, right?
But that's a terrible idea. The IRS has way more experience than you at this and they have the tools and the manpower to figure out if someone is underreporting. It might not happen right away, but sooner or later, underreporting will catch up to you. You don't want to be facing an audit and not be able to explain what happened.
Hire a Professional for Help
Self-employed individuals have to calculate a self-employment tax as well as navigate a complicated tax code to figure out exactly how much they owe each year. This process can be stressful but will become much easier with a professional accountant by your side. Contact a local tax preparation professional today for more information