Posted on September 04, 2021 by
Are you self employed? Do you work for yourself, or do you have employees? If you have both, then you are probably a bit confused with your tax returns. Whether you work for yourself or not, there are certain rules that apply to self-employed people. Here’s what you should know.
First of all, the IRS wants to know how much income you make and how much you spend. They use this information to calculate your tax brackets. So, one of the first things the IRS asks is what kind of income you have. Even if you work for someone else, you still have to report your own income because it’s considered part of your personal income. Self-employment tax rates vary greatly depending on the filing status of the person making the income. The higher the tax rate the lower your personal rate.
Other things the IRS asks include the location of your business and whether you get any tax deductions for working abroad. There may also be an evaluation of whether you are an independent contractor or employee. Independency is a very big thing in determining whether you can claim deductions. If you are working for someone and they don’t give you an allowance, then you cannot write-off your entire income. However, if you do receive a deduction for being an employee, you may be able to reduce your self employed tax due to the fact that you are no longer working for the company but instead, you are now receiving a percentage of their pay as a contractor.
In some situations, you may be able to deduct a home office as part of your tax. This means if you have a private computer, Internet connection, telephone, and office supplies, you can deduct a portion of your home expenses. Of course, this deduction is only available if you use the entire home for your business. You can also deduct a car if it was your private vehicle, if you don’t drive anywhere, and if you use it solely for your business.
Self-employed people may be able to write-off their investments in certain circumstances. You have to remember that you can deduct your investments in your personal life as well as your business life. So be sure to check your tax returns for any possible tax advantages that may apply to you.
If you have trouble with the Internal Revenue Service, you should not hesitate to contact a professional tax consultant. They will be able to help you figure out which deductions you qualify for, and will also be able to offer advice on how to best take care of your taxes. It is important to understand that there are laws on self employed taxes and that if you become negligent in paying them, you can end up having a serious tax problem. So always keep records of where you make deductions, and what tax forms you fill out, so that you can easily track down your taxes and pay them on time. The IRS may not be as sympathetic to your plight as your financial advisor would be.