Waiting for the forms. Filling out paperwork. Screaming obscenities at receipts. It must be tax time. Claiming income taxes at the year's end? That's self employment.
Claiming taxes at the end of the year is always great until that time actually comes. The annual tradition of receipt-wrangling, expense-claiming, and income-declaring is one of the downfalls of self employment and a huge endorsement for hiring a tax professional. But, it doesn’t have to be a nightmare.
Claiming Taxes at the Year's End
Those who receive a regular paycheck from an employer sigh in vain as income taxes are automatically deducted, money which goes straight into the pocket of Uncle Sam. These same people, however, often receive a nice hefty tax return check in the mail every spring. This is not the case with self employed professionals, who do not have money deducted for income taxes throughout the year.
Self employed professionals have to claim this income, and pay out what they owe in taxes, instead.
The Bane of the Self Employed
Paying taxes at the year’s end can be a pretty expensive business, as it comes on the heels of events like Christmas and the whole pricey holiday season. There are a few ways to soften the blow of paying out of pocket, however.
Save receipts. Do this throughout the year, and it should come in handy when it’s time to sit down at the tax table. Any single expense which is related to work can become a tax deduction, everything from buying copy paper to the gas used to drive to the office supply store. Even little expenses add up, and this helps reduce the amount that has to be paid out for income earned.
Check the rules. Not all income has to be claimed. Everything has a minimum amount. Find out what it is before it gets claimed. A penny not claimed is a penny in the pocket, right?
Work at home expenses. Work at home? That’s a deduction, too. Money spent on electricity, office equipment, even phone and Internet bills are all (in part) work expenses. And they’re deductible.
Talk to a pro. Talk to someone who knows tax law and knows what they’re doing before filing. Self employment taxes are tricky (there are even extra taxes which have to be paid), and claiming income at the end of the year can get a little sticky with multiple deductions. Make sure someone goes over tax paperwork with a fine tooth comb before claiming.
No Return? No Worries
Those who work at home and pay out income taxes at the end of the year might be facing a big bill instead of a big return. This might sound a little depressing, but there are ways to plan ahead and avoid this dismal financial letdown. Open a special checking account, separate from the main household account, and put money in the account every time money is received for work at home efforts. Do this every year, and tax time won’t be so expensive the next time around.
