If you have no dependents and are single, then filing your taxes is pretty straightforward, especially if you take the standard deduction. When you receive income from a side business too, that complicates matters because you have to pay business taxes. If this is the first year you've added business income to your return, then you may want to let an accountant figure your taxes for you so you don't make any mistakes that get you in trouble with the IRS. Here are some of the things you want to take with you when you go to a tax preparation office like Zara Rhone CPA Inc.
Proof Of All Income
When you receive income as a freelance contractor, you add it to the income you receive from a regular job if you have one. You only need to file a single tax return for all of your sources of income. You'll need to bring in your W-2 form from your employer, as this document is a record of your income and the amount of taxes withheld over the year. When you receive income as a freelance worker, it is recorded on a 1099 form. It provides the same information as a W-2, but it shows the IRS the money came from freelancing rather than from a job. When you file 1099 income, it triggers the business tax on your return.
Proof Of All Deductions
Even if you take the standard deduction on your tax return, you'll still want to list as many deductions as possible that are related to your freelance income so your business tax will be lower. The business deductions are taken from the amount of business tax you owe and are unrelated to the standard deduction you take based on your number of dependents. An accountant looks for deductions that help you the most while not raising red flags with the IRS. Still, you'll need proof of the deductions in case you are audited.
If you work from home, you can take the home office deduction. You'll be able to deduct a certain percent of your household utilities and other costs. For that reason, you'll want to take along copies of your utility and internet bills. To calculate this, your accountant and the IRS need to know the square footage of your home and the square footage of the office. Also include receipts for renovations you made to your home to create the office. In addition to home expenses, you can deduct expenses for gas and mileage if you used your car in your freelance work.
Other things you can deduct are tools and equipment you bought to do the job, such as a computer, printer, and monitor. You'll need receipts for these as well as for other expenses such as advertising and office supplies. If you haven't kept track of your expenses all year, it is nearly impossible to go back and get bills and receipts together for everything. Gather as many receipts as you can and then jot down as many expenses as you can remember and let your accountant know about them. However, you may not be able to claim the expenses if you don't have any documentation for them. Gather as much documentation as you can before you go to the accountant's office so you don't need a second appointment that may increase the cost of filing your taxes.
After you file business taxes the first time, you'll quickly learn what you need to do so your tax burden will be lower in the future. Ask your accountant about how to track and record your expenses so everything will be in order at the end of the next year. Also, your accountant may set up a system for paying your taxes quarterly if you have significant freelance income. This will prevent IRS fines at the end of the year. Plus, it is easier to pay a smaller amount a few times each year than it is a large amount on the day you file your taxes.