The Procrastinator’s Guide to Filing Your Self-Employment Taxes
This guest post is brought to you by Intuit’s QuickBooks Self-Employed staff.
The deadline to file your 2015 taxes is this coming Monday, April 18, but don’t panic, you’re not alone! Here are 5 steps that will help you get started.
1. Will I Pay or Will I Owe?
It’s helpful to start with an estimate of how much you owe on your self-employment taxes to help plan your annual tax payment. If you haven’t budgeted for this payment, you may consider filing for an extension to avoid a penalty while giving you time to allocate income for this payment and get organized.
2. Organize Your Self-Employment Income
You’ll need to dig up a few forms that summarize the self-employment income you earned last year, such as your 1099-K and/or 1099-MISC. As a heads up, you may not receive these forms if you didn’t meet the minimum reporting thresholds ($20K and 200 transactions for the -K and $600 for the -MISC) but are still required to report the income to the IRS.
3. Organize your Self-Employment Expenses
No one wants to pay more on their taxes than necessary so you’ll want to consolidate all of the expenses incurred for running your self-employed business. This will allow you to reduce your tax liability and keep more of that hard-earned money.
4. Avoid an Audit
To claim an expense, a deduction needs to be considered ordinary and necessary. In the event of an audit, the IRS will expect to see the accurate amount of each business expense, the business justification, the date incurred, the category of spend, and a proof of payment (receipts). QuickBooks Self-Employed make recording this easy because it imports expenses directly from your online bank account.
5. Putting It All Together
Now that your income and expenses are organized, it’s time to calculate the taxes owed from your self-employed business. To complete the necessary Schedule C (Form 1040), you can manually enter the consolidated subtotals for each category. However, tools like QuickBooks Self-Employed do this for you by automatically identifying and organizing them into Schedule C categories. When it’s time to file annual taxes, you can export your completed Schedule C to a tax professional or file directly with TurboTax.
For more answers to your tax questions, click here!