Doing Taxes When You’re Your Own Boss

Published on: Mar 17, 2021fb-roundtwitter-roundemail-round
Woman putting coins in piggy bank Daniel Creel

The Story

Whether you bring home the bacon as a freelancer, side hustler or the boss of your own small biz, one thing is for sure: the gov wants a bite.

Even if it’s not that much bacon?

If you made at least $400, the IRS requires you to file a return.

How do I keep track?

It’s smart to keep your own records, so nothing slips through the cracks. Including who paid you, how much, and for what goods/services, plus receipts for expenses.

Any company or person that paid you $600 or more throughout the year owes you a 1099-NEC form at the beginning of the new year. If you don’t get a form you were expecting by mid-February, send a reminder.

Okay. Anything else?

Some bad news: on top of your regular income tax, you have to pay a 15.3% “self-employment tax.” That covers Social Security and Medicare taxes that would have come out of your paycheck if you had a 9-to-5.

Oh, and if you expect to owe $1,000 or more in taxes for the year, the IRS says you have to “pay as you go.” Read: estimate how much you’ll owe them and make a few payments a year. If you underpay, you’ll owe a penalty. Quarterly estimated payments are typically due in mid-April, June, September, and January.

More tax deadlines? Great.

In better news...deductions. You might be able to write off some expenses. Think: business travel costs, career-boosting classes, a new work computer, even some housing costs – like part of your mortgage and utility bills – if you have a home office.

The more deductions you claim, the lower your taxable income and tax bill can be. Just make sure you keep receipts and records in case you get audited. Psst...audit = a gov investigation to confirm you told the truth, the whole truth, and nothing but the truth on your tax documents.

theSkimm

Doing your own work thing can make paying taxes more complicated. But understanding the rules and claiming the deductions you deserve can help you get it right. And keep more of your hard-earned money.

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