As a mommy entrepreneur, your time is valuable. Why spend more time than necessary doing taxes? Here are 10 self employed tax tips for work from home moms.
Working at home is something many moms strive for. Being home allows them to save costs on daycare, take care of things about the house, and spend more time with their family.
Many work-at-home jobs identify workers as independent contractors. That means you take takes out yourself, and must itemize deductions.
Here are self-employed tax tips and how it makes life easier come tax season.
1. Know What Can Get Deducted
When dealing with a business you run from your home, it’s important to understand what expenses get counted as business expenses, and deduct those. Many people feel confused on what items qualify as business deductions.
If you’re working from home these might look like:
- Internet expenses
- Phone expenses
- Computer purchases
- Printer Purchases
- Office supplies
- Items needed to create a product you’re selling
What items get deducted looks different depending on your business and what you offer. But it’s one of the important tax savings tips to make sure you’re reviewing what you purchase for your business and taking off the expenses related to that when you handle your year-end taxes.
This keeps you from overpaying and gives you an honest look at how much you spend and what your business makes back in profits.
2. Remember What Charities You’ve Donated To During the Year
Giving to charity is something many people do every year. Some do it because they believe it’s important, and they want to pay it forward to an organization they believe in.
Others know that donating means they can write more off on their taxes, as long as they do it before the end of the year.
There is no right or wrong way to approach giving to charity for tax purposes, and you can give out of the goodness of your heart, and to help make getting a tax break a little easier. Before you do though, there are some year-end tax tips you should remember.
- Keep a list of the charities you give to and how much
- Save any receipts you get from charities in regards to donations
- Don’t forget that tangible items such as clothing get grouped into the donation category
This makes doing taxes easier at the end of the year and ensures you have an accurate count of what you’ve donated.
3. Among the Important Self Employed Tax Tips is to Know Your Filing Status
Understanding your filing status can be tricky. There are a few to choose from and if you’ve recently gotten married, divorced, or lost a partner, you aren’t sure how to file taxes.
Sometimes when these events occur in the year have a bearing on what your status is. Some people don’t want their partner involved in their taxes and choose to file separately as a married couple.
If you’re not sure what status you should file as that is both legal and allows you to make the most of your taxes, consult a tax agent or the IRS. If you’re working a business from home and incorporate your company or become an LLC, you’ll find it helpful to see what manner of filing best matches your current needs.
4. Maintain Careful Records of Everything Tax-Related
Keeping careful records is something everyone needs to do with their taxes, but it’s especially important if you’re working at home. One of the most important small business tax tips is to make copies of receipts and anything you buy for your business, or anytime someone pays you.
If you consider yourself a digital nomad or even run more than one business from your home (such as writing and doing transcription services), it’s important to keep records.
Some items to hang on to for tax season include:
- Tax-Id Numbers also called an Employment Indifentication Number
- Payment Records
The more information you can keep filed away when you work on taxes and create estimated tax forms, the easier it becomes to get everything done at once. You won’t have the need to go back and look for something you think you’re missing but is still needed for tax purposes.
5. Check to Make Sure Your Accounting Matches Your Taxes
Dealing with accounting is an aspect of business no one necessarily looks forward to. It can get tedious and usually it’s easy enough to lose track of what sum you’re left with if you’re missing a receipt or a payment hasn’t cleared yet.
It doesn’t matter how much (or how little) money your business brought in this year or what types of items you purchased to get it up and running. Make sure you’re using a ledger and keeping track of every profit and loss that your business has.
Even if you sold items from your closet to fundraise in order to open your business, know what you started out with and how everything looked at the end of the year. If you notice issues where you forget to add payments or other problems, consider hiring an accountant to help you keep track.
This allows you time to focus on being self-employed, and your accountant likely knows about small business tax tips they can use to your advantage come next tax season.
6. Be Honest About Earnings
Many people feel they must overstate their earnings, especially when they are self-employed or run their own company. Often they feel if they do anything less, it would be considered a failure, and they don’t want to admit this to their family and friends.
It isn’t uncommon for many businesses to have a loss during their first year. That’s because it takes time to get up and running and acquire the type of client base that most companies need in order to flourish and truly bring in customers.
Even individuals who are self-employed and work as independent contractors for a company often lose money the first year. They usually purchase equipment or get themselves set up with the company.
There is sometimes a learning curve that accompanies self-employed work. When you’re working as an independent contractor, you’re only paid for the time you are actively working.
Rather than feel upset about the amount of money you’re earning, assess the situation in an open and honest manner. Reporting less money the first year isn’t a sign of failure and keeps you from paying more taxes than you owe.
Likewise, individuals that underreport are often caught and made to pay their taxes back anyway. Play it safe and be honest about how much you make, and you’ll never worry about unexpected problems.
7. Allow Plenty of Time When Dealing With Taxes
Giving yourself plenty of time is important with taxes. It’s common for mail to get delayed or lines at the post office to get longer than they usually are come tax day.
Instead, try to get your taxes started as early as February. If you work for a company that issues 1099s, these normally arrive around this time.
Getting a head start early means there’s plenty of time to check your taxes over twice or even three times, before sending them out to the IRS. If you’ve never filed online, consider doing so this year.
Filing online means you skip the wait at the post office and feel confident knowing that you’re no longer responsible for the forms. Think about providing your bank information so you can get a refund issued electronically.
You won’t need to check the mailbox for your rebate, and can potentially avoid problems related to identity theft because someone stole your refund check from the mailbox. Refunds issued electronically arrive quickly, meaning you get your money back sooner than if you waited for a paper check.
8. Get Help From a Professional
If you’re still not sure about what the best practices are for filing your taxes as a self-employed individual, consider getting help from free online tax tools. Use tax preparation products such as Ultimate Tax, or let an enrolled agent or other tax professional assist you.
It’s still necessary to keep careful records of your information, so your tax accountant knows what’s going on. But if you’re getting confused or aren’t sure what to do with your taxes, having a professional on your side makes things easier later on.
When it comes to self-employed tax tips, keeping careful records, knowing what to deduct, and how you should file for optimal benefits is important. Knowing the answers to these questions saves you money and makes the process simplified.
If you’re a mom who is looking for more ways to work at home, check out our blog post on the best businesses for a stay-at-home parent. You’ll discover new ways to earn an income without the need to leave the house.