Do you need help with freelance taxes?
These days, many people work in a freelance capacity. However, regardless of how you work, you must do your taxes perfectly. It means proper documentation, ensuring the deductions, and more.
However, many freelancers make crucial mistakes that can harm their taxes–changes they’ll have to deal with going forward. What are those mistakes? Need help fixing them?
We’ve got you covered. Keep reading to learn all about the freelance taxes mistakes you should avoid.
1. Being Unaware of Self-Employment Tax Obligations
One of the most common mistakes people make with freelance taxes is unaware of self-employed tax obligations. When you are self-employed, you are your employer and subject to more taxes above and beyond what you deduct from employees at a W-4 job.
It includes potential Social Security and Medicare taxes, estimated payments, and other possible deductions. Neglecting to set money aside each quarter for taxes can get people into trouble with the IRS and owe hefty fines.
2. Failing to Pay Quarterly Income Tax Estimates
One of the most common mistakes people make when dealing with freelance taxes is failing to pay quarterly income tax estimates. This mistake can result in severe interest and penalties that can add up.
As a freelancer, tracking and reporting income and making estimated payments on time are critical. You should make these payments regardless of whether you’ve made any money.
It will help avoid the stress of owing a large amount of money at the end of the year. You can make these payments to the IRS and your state tax department.
3. Overlooking Tax Credits and Deductions
One of the most common mistakes people make with freelance taxes is overlooking tax credits and deductions. It can result in payers owing too much in taxes or not taking advantage of potential savings.
Tax credits and deductions can help freelancers reduce the small business taxes they owe, so they must be aware of them. A good practice is to research the various credits and deductions that may be available to them each year. Also, be sure to keep detailed records of all deductions. It ensures that you report the right amounts to the IRS.
4. Making Incorrect Tax Withholding Calculations
One of the most common mistakes people make with freelance taxes is incorrect tax withholding calculations. This mistake can cause people to owe more taxes than necessary, which can be costly. To avoid this, freelancers should research their taxes and get advice from a qualified professional. Check out Startanexchange.com for more information on making the proper calculations
5. Ignoring Recordkeeping Requirements
Many people need to pay more attention to these requirements when dealing with freelance work. Providing an accurate picture of expenses, deductions, and total income can be easy with proper records.
It can lead to incorrect tax payments and even potential penalties. Furthermore, poor recordkeeping can also lead to miscalculations of estimated taxes which can become costly.
Follow This Guide to Avoid Mistakes Doing Freelance Taxes
When doing freelance taxes, many pitfalls can lead to hefty penalties. It’s critical to create a plan and track earnings, learn the tax requirements and filing methods, and speak with a tax expert to avoid missteps. Be proactive to enjoy a stress-free tax season! Contact us today to learn more.
So, now that you know some common tax mistakes to avoid with freelance work are you ready to start charging and tracking your income? If so, check out the rest of our Finance section.