'Tis the season! We all need a hand sometimes when it comes to a self-employed worker's favorite time of the year.
Don't sweat it. You're not alone. Up to 30 million people a year wind up with a tax bill instead of a refund, but they may not owe as much as they think.
Luckily, there are a few simple steps you can take to pay less in taxes this year. Let's go over some important tax tips so you don't pay more than you owe this filing season.
7 Essential Self-Employed Tax Tips
Many business-savvy, diligent people who save a percentage of their income throughout the year for their taxes may still end up owing more than they've saved. The good news is that this doesn't have to be the case.
Remember that nobody gets in trouble for paying more in taxes than they need to, and that's why you never hear about it. However, it's a lot more common than you'd think.
Let's look at some of the best ways to avoid a hefty payment so you can keep saving for your future.
1. Find Everything You Can Write Off
This is the most important tip of all. In almost every field, there are plenty of business expenses that you can write off.
Anything that you need for your business, you can write off as an expense.
As an example, Uber drivers are independent contractors. They need a cell phone with unlimited data to perform their duties properly. They also need a vehicle.
Not only can an Uber driver write off their phone bill, but they can write off the interest on their car payment, their insurance bill, any car repair or maintenance bill, and a lot more.
Be sure to look into every penny that you can count as an expense and try to record them more diligently if you haven't been doing so already.
2. Stay Up To Date
Even the IRS has trouble with constantly varying tax laws. Tax laws can change hundreds of times within any year, and you need to know any changes that may affect your wallet.
There are plenty of resources to stay up to date with changing tax laws if you are preparing your own tax return, but the professionals will definitely know best.
3. Get Organized Now
There is nothing more stressful than preparing every document, receipt, and pay stub at the last minute. As early as possible, get everything that you need ready, whether you are filing yourself or through a tax company.
Not only that, but if the IRS audits you after filing, it is best to have everything in writing, organized, and ready to go.
4. Call In Outside Help
Having a tax company help you with preparation and filing will cost some money, but it could definitely save you money as they are best prepared to help you lower the bill. Not only could it reduce your current year's taxes but proper tax planning will also save you a lot of money in future years as well. But the planning starts now. Read more about how Our services might be able to help with that.
In the event of an audit, it is likely in your best interest to hire a tax lawyer for your protection. Even when you are certain that everything is done properly, mistakes happen. Protect yourself and your money with some legal help.
5. Consider Retirement Contributions
Okay, this one is a win-win. Get a lower tax bill and better prepare for your financial future. The best part is that your funds will be partially or fully deductible, depending on your income level.
Doing this last-minute at the end of the year is not a bad idea if you have enough saved up. You can even contribute to your IRA up to the April deadline assuming your are not restricted due to your income.
There are plenty of other financial investments and strategies you can utilize to lower your tax bill, but this is the most common.
6. Donate to Charity
Nobody is more charitable than an entrepreneur approaching their tax deadline. Depending on your tax situation, donating to charity can lower your tax bill.
It doesn't have to be specific, so you can choose a cause that's important to you and actually benefit from it! The IRS will reward you with a deduction for donations to nonprofit groups that are religious, charitable, educational, scientific, literary, or that work to prevent cruelty to animals or children.
If you have a cause you believe in and you want the deduction, you may have nothing to lose with this method.
7. Check It Twice
This doesn't mean giving your return a quick second-look right before filing. As we mentioned, mistakes happen. If you are filing online, you may not be able to propery review your return and therefore won't have the peace of mind you need.
The solution is simple. Look over every detail, scrutinize everything, and if anything seems off, exaggerated, or mischaracterized, fix it. Search the internet or ask a professional for help.
Once you have looked it over thoroughly and you are certain that it's accurate, give it an extra glance for good measure. When you are finally satisfied, it's time to file.
What Else?
While paying taxes isn't the most fun thing in the world, you can't avoid it. However, it only has to be as stressful as you make it.
If you use these tax tips when you are filing for the upcoming tax season, and you have kept track throughout the year, then you should be confident going into the tax season.
If you're still anxious and want to be best prepared for the bill next year, then get a quote and get ready!