Are you part of the on-demand or gig-economy? Pew Research Center indicated, "Self-employed Americans and the workers they hired accounted for 44 million jobs in 2014, or 30% of the national workforce." From Airbnb to Uber, more and more people are departing "regular" jobs to be their own boss with the promise of higher income and more flexibility as the reward. Even if you don't receive a 1099, the income you earn in your own business is taxable. Track your income and expenses throughout the year to determine your quarterly estimated tax payments easily; another benefit to tracking them on an ongoing basis is it allows you to get the biggest refund you possibly can.
2016 first quarter estimated payments, are due Monday - April 18. Remember you need to pay 90% of your total tax bill by January 15 next year or you could be penalized. Typically, the IRS collects the prepaid taxes through withholding. Since self-employed taxpayers have no taxes deducted from their pay, they must make estimated tax payments four times a year. For more information check out How Do I Make My Quarterly Payments on the IRS website or seek the help of good tax pro.
Back to those business basics, tracking all the income you received doing your gig is critical. I recommend creating a simple spreadsheet to organize your income and expenses by month. Be sure to include every bit of income not just your actual pay, but tips, freebies, and even swag or Swagbucks too because it is all taxable. For example, if you are an entertainment writer and you received a new album to review, then the value of the album is considered income and is taxable.
It is important to track your expenses properly so you can claim all your allowed deductions and reduce your taxable income. Begin with all your start-up costs, which include the initial research to start a business and the necessary legal fees and training. Other typical write-offs include things like the cost of advertising, depreciation on your business equipment, and professional fees. The IRS allows you to deduct all ordinary and necessary expenses for your business and they define ordinary and necessary expenses as those that are common and accepted as well as helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary. For more information refer to IRS Publication 535 or ask your tax pro.
There are lots of deductions and credits available to help the average taxpayer reduce their tax burden, but your occupation may entitle you to specific job related ones and taking advantage of those can help you get a bigger tax refund. If you are self-employed, tracking income, expenses, and critical due dates not only helps you keep more of your money, but can help you avoid paying penalties for underpayment or late payments. If you are not sure what you can or cannot claim or what form you need to file and when, then find the help of a good tax pro - it's a write-off.