What the IRS Could Be After From Your Side Gigs
The IRS is after you. Your job’s income to the taxman is their pot of gold. Perhaps broadening your side gigs is the key to escaping taxes? Think again! It turns out that you’re wrong because the IRS will still come after all the extra money you’ve been making.
Too many people fall into the trap of thinking the IRS won’t run after any opportunity to squeeze every last cent out of you. So don’t think that the taxes won’t be able to catch up. They will most certainly will and you need to be prepared for it. We’re going to teach you a little about how to stay on top of your taxes so that you can avoid hefty fines and heavy penalties.
Some Good News
You’re in for a little bit of a treat if you are self-employed. As a sole proprietor, the IRSE does give you tax breaks and benefits and that any typical worker or employee would not get. You will be able to find the details of benefits on the IRS website.
Home Office Tax Deductions
Decided to make your home a place to work? Well, don’t get too excited because it doesn’t mean you’re going to be having too much fun. For one thing, doing your taxes isn’t too much fun, but you’ll be happy to know that you are entitled by law to some tax deductions.
Just refer to Section 179 and you’ll find out about the tax-deductible benefits you are missing out on. Ever think that office supplies like laptops, mobile devices, and all other types of electronic equipment would be tax-deductible? Well, they are and that’s not all! Business-related traveling and marketing activities are subject to tax deductions, which means that you need to keep track of all the expenses involved in these different activities.
For you to take full advantage of these benefits, you will need to make the following tasks a regular habit:
- Maintain records of all your expenditures, which you should be doing anyway to keep track of your profits. This means having an organized file for bank statements, invoices, and receipts that are meticulously logged and dated. As long as your files are easy to follow, then you shouldn’t have a problem squeezing every tax-deductible cent.
- Be professional with your treatment of tax deductions. Do not use them to indulge in extravagant vacations with the excuse that they are ‘business trips’ or to spend on activities for personal amusement. Business funds are for business only!
- If you feel stuck, don’t shy away from consulting a tax professional or a financial advisor for further guidance on how you can benefit from IRS laws regarding sole proprietors.
Did You Hire Anyone Else?
If you paid a freelancer or another private contractor to do work for you, then you are required by law to have them complete a 1099 form. What you will need to do is purchase the 1099 hard copy version and have it sent electronically to the individual you chose to work with. You will send another copy to the IRS. The entire process has to be complete before January 31st or else you will be forced to pay a pretty hefty fine.
Don’t Forget Your Quarterly Taxes
Remember while you were working full-time when your employer had to deduct part of your salary to pay the IRS? Now, it’s your turn to deduct from your own earnings to pay taxes for the IRS. As a self-employed lone wolf, you’re now responsible for filing your quarterly taxes. Don’t underestimate its importance because failure to do so could result in getting hit with a fine.