Awesome Tax Tips for the Self Employed

by Kristina on February 10, 2014 · 3 comments

Good morning Dinks.  It’s that time of the year again, the time when we all wait anxiously for papers to arrive in the mail, the time when we have to gather all our expenses over the last year and the time when we have to try and fit an appointment into our accountant’s busy schedule.  That’s right, it’s tax time.  Have you filed your personal income tax yet?

As you know I am a personal financial planner, not a tax specialist.  Although I do have a pretty good grasp on investing and taxes as well as what I need to do for my personal income tax filing as a 9 to 5 employee (who loves her job) and a freelancer (who makes a good chunk of change at it to support my travelling habit).  But I don’t consider myself qualified to give tax advice to others.

So why are you still reading?  Don’t click away yet.  I am not a personal income tax expert, but I have rounded up a handful of awesome tax tips from some truly amazing bloggers. So don’t fret – this post will be beneficial to you.

Personal income tax tips:

Sabado @ Len Penzo  tells us what information we should be tracking all year.

If you don’t like papers lying around your house then scan your documents and keep them on your hard drive.  But don’t shred anything before you make a digital copy because you may need it later. By later I mean years down the road when Uncle Sam decides to audit you because you make too much money don’t what you love.

Len Penzo tells us that we need to make sure we keep all of the paperwork related to our taxes for at least three years as required by the IRS. Keep your tax information close by in case you are ever called upon to verify previous tax filings.

Madison @ My Dollar Plan tells us that keeping informed on current tax laws makes our life easier.

Just like everything in life, tax laws can change.  My Dollar Plan says that reviewing new tax rules will make your life easier when filing your personal income tax.  In 2013 the IRS introduced a new 3.8% tax on investment income including capital gains and dividends for people with high incomes. If you are subject to the new tax pay close attention to your end of year strategy to realize gains and losses.

My Dollar Plan suggests completing a personal tax simulation to give yourself a better idea on how your tax situation will look when you file. You can run a personal income tax estimate using a program such as Turbo Tax.  This will also let you know if you need to increase contributions to your retirement plans before the deadline.

Carrie @ Careful Cents shows us how to avoid double income declaring.

Careful Cents discovered that she doesn’t need to issue 1099 forms to contractors if she paid them via PayPal because PayPal will issue them directly.

J.Money @ Budgets Are Sexy helps people who need to pay quarterly taxes. 

When you have a 9 to 5 job your employer usually deducts a percentage of income tax with each pay check. But if you are self employed you have to do it yourself. Every quarter people who are self-employed must send in a payment to IRS. Budgets Are Sexy warns us that “you have to figure out the amount for yourself and send it in on your own.”

FYI: Quarterly taxes are due mid month every quarter in April, June, September and January.

Photo by soukup



{ 3 comments… read them below or add one }

1 Carol Topp CPA February 11, 2014 at 8:14 pm

Kristina, Can you point me to the Careful Cents blog post where Carrie explains that PayPal will send out 1099MISC for you. I poked around her blog, but couldn’t find it.
I had not heard that PayPal would do that, so I want to check it out.
Thanks.

2 Carrie Smith February 12, 2014 at 11:28 am

Thanks for including my tip Kristina. And hello Carol, Thanks for your question!

I haven’t written up the blog post for this, as I was still doing some research. But I based my decision on information from the Instructions for Form 1099-MISC: “Payments made with a credit card or payment card and certain other types of payments, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate Instructions for Form 1099-K.”

Also, if I was to send a 1099-MISC for $1,000 (for example) and PayPal sent a 1099-K for $1,000 (because you were paid through PayPal), it would appear as if you made $2,000 when you only actually were paid $1,000. I also received a warning when preparing my 1099s with Intuit’s service “NOT to include any amounts you paid through a payment card (such as a credit card, debit card, or gift card), or third-party network (such as PayPal).” More info here: http://bit.ly/1lCMhJp

3 Kristina February 12, 2014 at 9:31 pm

This is why I love blogging. We all help each other out!

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