This post is part of the TaxACT #BeatTheDeadline blog tour which shares tips on how to make tax time a smooth and easy process before the April 15 deadline. TaxACT provides the tools and guidance to help you confidently file taxes easy and fast. Do your own taxes today at TaxACT. You got this.
I absolutely love being my own boss and working on my own schedule. I can let my inner night owl do its thing, without having to be “on” at 9am. I can respond to things in my own time. And I can take afternoon naps. It’s so lovely.
But one area that is drastically different and kind of a pain? My taxes. It was so easy to do my taxes when I had one W2 to deal with. This year alone, I had one W2 and about 10 different 1099s. It was also the first year that I had to do quarterly taxes because of my self-employed status.
If you are just starting out, learn from my mistakes and disorganization! Here are some tips to make the tax process a bit easier.
Luckily, I did one thing right and I saved a lot for my taxes. Being self-employed, I saved 30% of all my income. After all, when you work for yourself you have to pay your portion of social security and medicare. It turns out I saved more than I needed to, because I’m not actually in the 30% tax bracket. But I’m happy to have the money in my account and ready to pay! It’s much better than the converse. I’d much rather have the money in the bank, rather than scrounging up money to pay my tax bill.
If you are self-employed, always save more for taxes than you think you need to. If you saved more than you need to, you can always use it elsewhere, or just carry it over until the next quarterly payment.
I have a bad habit with receipts — for my whole adult life, I’ve considered them trash. I would immediately crumble them up and throw them away. Now that I’m self-employed? I need to change my habits. I can deduct my business expenses, which means I need to keep proper documentation of my expenses, with receipts.
As a business owner, you can deduct many things from your taxes. If you work online like I do, you can deduct your internet, part of your phone bill, and computer expenses. Luckily, I was smart enough to keep my receipt when my computer crashed last fall. All of your expenses can help lower your tax liability, so keep your receipts! You can go old school and keep your receipts in an envelope or a folder, or use something like Expensify.
I know that I missed out on a lot of deductions — i could have deducted blogger happy hour expenses and FinCon expenses as part of my business, but I didn’t keep good records of it. This year, I am doing a much better job of keeping my receipts!
Something that I am in the process of doing asap is getting a proper business checking account (I know, I know, I’m late to the party). At first I thought it was cool to just keep getting paid in my personal account — I was growing my business and not making that much in the beginning. But now I’m making more and if I want to take myself and my business seriously, I need a business checking account. Not only that, I am now seeing firsthand how much easier it makes it to track your income and expenses. I had to comb through my PayPal and my personal account to make sure all my income was accounted for (side note, if you have an affordable bookkeeping software you love, let me know).
It was such a pain. I admit that I feel confident in what I offer as part of my business, but I am just not very good when it comes to administrative stuff. It’s the last thing on my mind and I’d rather focus my energy elsewhere. But this year I’ve learned so much and realized I do need to have systems in place to make sure my taxes are not a nightmare and that I have money in the bank to pay my quarterly tax bill.
If you are self-employed, or even have a side business, make sure you are saving enough for your taxes, keeping proper documentation of your expenses and income, and that you are reporting all your income.
What other tips do you have to add for self-employed folks doing their taxes?
Beating the tax deadline doesn’t have to be stressful. With TaxACT, everything you need to confidently prepare and e-file your taxes is right at your fingertips. You got this. File your simple or complex federal return FREE today with TaxACT Free Edition.
p.s. My boyfriend ended up using TaxACT this year and it was super user-friendly and easy!