3 Costly Mistakes To Avoid When Filing Your Taxes As A Self-Employed Freelancer
Breaking away from the nine-to-five and being your own boss sure comes with its fair amount of perks as a freelancer, but when tax time rolls around, all the glory you take advantage of through the year can pale in comparison to the hassle of filing your self-employment taxes. It can sometimes feel like just being a freelancer means you are being penalized by the IRS, with costly self-employment taxes to pay and complications at every turn. However, you can make things even harder on yourself during tax-filing season if you don’t get professional help. Take a look at these common filing mistakes you have to avoid as a self-employed freelancer.
Mistake: Not claiming deductions out of fear of an audit.
Why? The big and scary idea of being an audit risk prevents a lot of freelancers from claiming deductions they are truly entitled to that can save them a lot of money during tax time. Even though your risk of an audit goes up slightly with deductions as a freelancer, you should never let this slight risk keep you from claiming these deductions. As long as you are being honest and have the paperwork to back up whatever it is you are claiming, you should be fine even if you do get audited after filing.
Mistake: Trying to write off too many deductions.
Why? At the other end of the spectrum from those who are scared to claim deductions at all falls the freelancer who tries their darndest to write off everything they can think of. While it is definitely ideal to claim as many deductions as you can, whether it is fuel costs to get to meetings or hotel stays relative to business, you cannot go overboard and try to write off things that aren’t even business related. keep receipts on all of your purchases through the year and talk to your accountant or tax adviser about what can and cannot be deducted.
Mistake: Not getting advice from a professional about your tax filing situation.
Why? So now you are a freelancer, and even though the taxes you have to file look more complicated, you try to navigate through on your own. Because you are self-employed, you are now basically a business owner, which can completely change everything about how you file your taxes. It is especially important to get some helpful advice from an income tax preparation expert the first few years that you are self employed.