Being self-employed means that you have to keep track of your spending and income in ways that people who have other employment don't. Here are tips to help you stay organized when you are self-employed so all your taxes are accounted for when the season rolls around.
Track all travel receipts
If you travel for business, make sure you track all your receipts. You can get reimbursed for your gas mileage, meals, and other related expenses when you go to write off your taxes. The accountant you use can provide you with a booklet you can use to log gas mileage or cost of gas on the days that you travel for business so you can account for all your spending in this manner.
Save a portion of your earnings
As a self-employed individual, you don't have taxes taken out of your paycheck for things like Social Security. This is paid when you file your taxes quarterly or once a year. Set aside a portion of your earnings based on your tax bracket so you have the appropriate funds to pay for taxes when they come due. You can use a tax calculator for both federal and state taxes to help you calculate just what percentage of your earnings you should set aside to pay with when you file.
Know your home office use
Portions of your bills you have at home can be written off on your taxes if you use certain utilities for your work or you have a home office. A home office is typically deducted by the square footage it takes up in your house versus what you pay for your mortgage or rent. The rest of your utilities, such as electricity, phone, Internet, and other necessities, are typically deducted your tax accountant by the percentage you use for working and not home use. It's a great idea to take your utility bills and mortgage with you when you file taxes so you can accurately calculate what can be written off.
If you buy a computer, laptop, printer, or other office equipment during the year, you can save those receipts as well. These items can be deducted from your earnings to help reduce the amount of self-employment tax you pay when you file.
You need to keep track of your finances, home office, and travel use when you are self-employed. This way you can write off the right amount of deductions whether you file quarterly or once a year. Talk to an accountant, like Balkcom Pearsall & Parrish CPA's PA, for more help.
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