Building a Business
14

5 Things I Learned About Self-Employment Taxes

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I was DREADING getting my taxes done this year. It was my first time filing as completely self-employed and I knew every form, expense, and intricate detail of my financial life was going to be really important to note. Organization was key.

Luckily, I found the perfect accountant for me to not only get everything done correctly, but help me learn a lot about being in business for myself and handling the money correctly. Here are 5 really important things I learned from my accountant this year when I filed my taxes:

  1. The maximum amount of student loan interest you can claim is $2,500.00. Ouch. Too bad the rest of those payments didn’t help me out. Cause I sent PLENTY of money that way. Oh well. As long as you can claim it, make sure you have your form for proof! P.S. I’m sure this is not just for those of us who are self-employed but it was pretty relevant for me!
  2. When traveling for business, you are allotted $52.00 per day for meals. This is good for those of us who don’t actually spend that much on food everyday when we travel. But if you do, you want to be more careful so you’re not overdoing it on food when you don’t need to. Regardless, make sure you hang on to your receipts so you can figure it out later or as you go.
  3. As an independent contractor, I can file for an SS4 with the IRS instead of giving my social security number out to clients. Hello?? Why didn’t I know this? That’s f*cking fantastic! You never know when the wrong person is going to get ahold of your personal information. File for an SS4 and send your new and existing clients your updated tax form.
  4. If you want to start paying the IRS quarterly so you’re not hit with a big debt on Apr 15 every year, they determine those payments on what you made the previous year. Make sure you’re realistic with yourself if that quarterly suggested payment is good for you. If you’re making more money than you were making last year, you want to probably pay a little more quarterly to be more kind to yourself come tax season.
  5. You can find brilliant accountants through personal referrals and they will do as good of a job if not better than the big brands that want to charge you 3-4 times more. Don’t go cheap on getting your taxes done, but do your research with friends, colleagues, and family of who they trust. You just might find an opportunity to support another self-employed professional charging a totally reasonable price.

What do you learn when you got your taxes done this year?

Amy Schmittauer Visit Website
Amy is the Founder of Savvy Sexy Social and President of Vlog Boss Studios, a digital marketing agency specializing in video content creation. Connect with her on Twitter.
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14 comments
JTDabbagian
JTDabbagian

Me personally, I learned to make my payments monthly. I can't do the quarterly bit, but as long as the IRS and the state get their money on a regular basis they don't seem to care. Also, I pay 20% instead of 15.6, just in case. 

 

And you don't even need to mail the SS4. You can file for an EIN online or by calling the IRS as well. Either way, you're assigned one IMMEDIATELY instead of waiting. 

 

Also, I like the idea of finding a local accountant, but if you can't, DO NOT GO TO H&R BLOCK. They seriously overcharge for a few extra forms. Instead, you can easily use H&R Block's online service which walks you through the process and do it yourself for a fraction of the price.   On the plus side though, you can deduct their fees as a business expense for next year. 

rockstarcpa
rockstarcpa

This is all really great information that can save you money and headaches during tax time.  We love to see freelancers and independent contractors helping each other out with good advice and tips. 

MichaelBowers
MichaelBowers

Good information here. A lot of this kind of information is what we deliver in our SBDC BizStartNow programs. Hopefully we can bring people up to speed on the business side of being in business before they make mistakes that can hurt them down the road.

jtwebman
jtwebman

Amy you don't do all your work under a corporation? I might suggest that as it offers you protection from you personally getting sued and also then the corporation has a tax ID you give clients. You also can have more right offs as travel and such can be all under a corporation credit card instead of a personal one. Corporations can also own cars ;) and rent office space from you ;)

AdamLehman
AdamLehman

One of the things I have to constantly remind myself (and @alliepal ) is that you only pay taxes when you make money, so paying more taxes each year is something you should expect. 

 

Love your advice about using a tax pro as well. I'd high recommend @charitax . 

omv
omv

anyways what I was doing was to put 18% aside every time I did a job then pay that money quarterly and I broke even or got money back every single year.

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omv
omv

I did my own taxes when I was self employed, I knew all this except the SS4 lol would have come in handy. anyways I hope they didnt slaughter you too bad.

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schmittastic
schmittastic moderator

 @MichaelBowers Definitely. It's so great to have an organization like SBDC to help people with this stuff. I know I could use a couple courses of there. @OHGrowthSummit FTW!

schmittastic
schmittastic moderator

 @jtwebman I'm not interested in being a corporation. I'm an LLC so that's protected, but some work still comes to me as Independent.

schmittastic
schmittastic moderator

 @omv that's brilliant! makes it a lot easier to gauge what you're going to owe.

schmittastic
schmittastic moderator

 @omv I actually did better than expected. Really happy about it actually.