As a gig worker, you may not have a traditional employer-employee relationship. This means that you are responsible for paying your own taxes.
While this can be daunting, there are some things you can do to make sure you are prepared come tax season.
Here are some end-of-year tax tips for gig workers looking to make the most of their spot in the booming gig economy.
1. Make Sure You’re Claiming All the Deductions You’re Entitled to
When it comes to taxes, everyone wants to get the biggest refund possible. And while there are a lot of ways to save on your taxes, one of the best ways is to make sure you’re claiming all the deductions you’re entitled to.
There are deductions for everything from job-related expenses to medical bills, and if you’re not claiming them, you’re leaving money on the table.
So do your homework and make sure you’re taking advantage of all the deductions available to you. Claiming the right deductions can make a big difference in the size of your refund.
Since the end of the year is approaching, it’s a great time to maximize the deductions you’re using. Consider purchasing any materials you need for the upcoming year that fall under the expenses or deductions category.
That can mean office supplies, vehicle supplies, and whatever else is considered a necessary purchase for your business.
2. Keep Track of Your Business Expenses
Any business owner knows that expenses can quickly add up. From office supplies to employee salaries, there are many costs associated with running a business.
The same goes for the self-employed – who are usually responsible for covering all of their own expenses out of pocket. That’s why it’s important to keep track of your expenses and to make sure that you are spending money wisely.
There are a number of ways to do this, including setting up a budget and tracking expenditures using software or a spreadsheet. By taking the time to monitor your expenses, you can spot ways to save money and ensure that your business is running efficiently.
Plus, tracking expenses helps to make sure that you’re ready for tax time.
3. Get Organized (& Stay on Top of Your Paperwork)
One of the best ways to stay on top of your paperwork is to get organized. Invest in a good filing system and make sure to use it. Use folders labeled with different categories in your filing cabinet, and file papers as soon as you receive them.
This will help you stay on top of your paperwork and avoid letting important documents fall through the cracks.
In addition, try to keep a neat and orderly desk. Make sure all of your materials are easy to find and take the time to declutter on a regular basis.
A little bit of organization can go a long way toward helping you stay on top of your paperwork. If you’re more into virtual operations, there are plenty of organization methods for the digital.
For example, within email accounts and finance software, make sure to keep things organized for easy access. Also, consider sprucing up your profile, trimming down any ramblings, or replacing outdated information.
The approaching new year is the perfect opportunity to implement any habits you’ve been meaning to get around to. Whether it be better mileage tracking or business banking, set yourself up for the new year before it arrives.
4. Review Your Withholding Exemptions
The end of the year is a good time to review your withholding exemptions. Withholding exemptions are the amount of money that you can have withheld from your paycheck for taxes.
The more exemptions you claim, the less money will be withheld from your paycheck. You can claim withholding exemptions on your W-4 form.
If you had a major life event during the year, such as getting married or having a baby, you may need to adjust your withholding exemptions.
You will also need to adjust your withholding if you had a change in income or started a new job during the year.
It’s important to make sure that you are not having too much or too little money withheld from your paycheck. If you have too much money withheld, you will get a refund when you file your taxes.
While getting a refund may seem like a good thing, it actually means that you have loaned the government your money interest-free.
On the other hand, if you don’t have enough money withheld, you may owe money when you file your taxes. You may also be subject to penalties and interest charges.
So take a few minutes to review your withholding exemptions and make sure that they are accurate for the upcoming year. This will help to ensure that you don’t end up owing or getting a large refund come tax time.
5. Estimate How Much Tax You’ll Owe and Start Saving Now
No one likes to think about taxes, but it’s important to be prepared. Estimating your tax liability and setting aside money each month can help ease the pain come tax time. Here’s how to get started:
First, take a look at your income for the year. Depending on how much you earned, you may be in a higher or lower tax bracket. This will affect how much tax you owe.
Next, calculate any deductions or credits you may be eligible for. This can reduce your taxable income and lower your tax bill.
Finally, use an online tax calculator or speak to a tax professional to estimate your tax liability. This will give you an idea of how much money you need to set aside each month.
Saving for taxes may not be fun, but it’s better than getting a big bill come April. By taking the time to estimate your tax liability and start saving now, you can help make tax time a little less stressful.
6. Consider Hiring a Tax Professional to Help You File
Many people choose to hire a tax professional to help them file their taxes. While it is possible to do your own taxes, it can be complicated and time-consuming.
A tax professional can help you to ensure that you are getting the most money back or that you are paying the minimum amount of taxes required.
They can also help you to file your taxes on time and can provide advice if you have any questions.
If you are thinking about hiring a tax professional, be sure to research different options and find one that is reputable and has experience with your specific situation.
The Takeaway
As a small business owner, it’s important to always keep up with your taxes and prepare for the next round.
Ways to do this include being aware of the various tax deductions and exemptions you may be entitled to in order to minimize your taxable income by keeping track of your expenses and organizing your paperwork – all with the goal of making the process smoother come tax time.
Taking these steps ahead of time will help ensure that you pay the least amount of taxes possible while still meeting all government requirements.
Have you started preparing for this year’s taxes? What tips would you add? Let us know below!