Tax tips for gig workers
According to a recent article in Forbes, there are some common dos and don’ts for gig workers when it comes to taxes that are often overlooked. Here’s a quick summary.
Make quarterly estimated payments
Federal income taxes in the U.S. are a “pay as you go” system. When you work for an employer, federal and state income taxes and payroll taxes are withheld from your paycheck. When you work for yourself, it’s your responsibility to estimate your tax liability and send estimated payments to the IRS each quarter on April 15th, June 15th, September 15th, and January 15th of the following year.
Don’t forget about self-employment taxes
Self-employment taxes cover Social Security and Medicare taxes for self-employed individuals – similar to the FICA taxes that are withheld from an employee’s paycheck.
Separate your personal and business finances
Keeping your business and personal finances separate provides an array of benefits. It makes your business look more legitimate to clients and lenders and makes it easier to track business expenses.
Don’t fear the home office deduction
If you use a home office regularly for your gig work, you may be able to take the home office deduction. Using the simplified method, the home office deduction is worth $5 per square foot on up to 300 square feet.
Track your mileage
Deducting the miles driven for business can be a valuable deduction for some gig workers. This is especially true if you work as a ride-share driver or courier, but even home-based gig workers can rack up miles running errands, meeting with clients, and attending business networking events.
Don’t forget to save for retirement
The IRS allows taxpayers the opportunity to contribute up until the filing deadline for certain retirement accounts that can help offset some of your self-employment income. A SEP-IRA is a good starting place. For 2019, you can contribute up to 25% of your net earnings from self-employment, up to a maximum of $56,000.
Work with a qualified tax professional
Being self-employed brings a whole new level of complexity to your taxes, so you should seriously consider working with a professional.
Read the full article here: https://www.forbes.com/sites/janetberryjohnson/2020/01/31/tax-dos-and-donts-for-new-gig-workers/#436eaf9163ae