We live in a gig economy, and this directly affects how many people file their taxes. So, what are the most important things to consider as a gig worker during tax season? Here’s a helpful video from TurboTax plus our own tips and commentary.
Gig Workers, Big Deductions
As a gig worker, you’re likely to qualify for big deductions that can reduce how much you owe the IRS in taxes.
Potential Tax Deductions for Freelancers:
- Health Insurance premiums
- Home office expenses
- Office supplies
- Subscriptions like WSJ or Adobe
- Internet and phone bill
- Travel expenses
- Mileage and gas
- Website design & development (more)
TurboTax has some good resources for freelancers here.
Bigger Risk: Underpaying or Overpaying Taxes?
Underpaying your taxes is a bigger risk because you might incur penalties. So, when you’re self-employed, if you expect to owe over $1000+ you should pay quarterly taxes.
Quarterly taxes schedule:
- April 15th
- June 15th
- September 15th
- January 15th (following year)
When you file with TurboTax they will help you figure out your estimated quarterly payments and also help you find tax deductions for your specific industry with their industry-specific deduction finder.
This is why it’s important to not use off-brand or inadequate software when doing your taxes. Sure, you could save $20 by using the free version (is it really even free?), but what if you miss even one significant deduction? In the long run that could cost you hundreds of dollars!
Example: If you are a photographer, all related supplies are a deduction including lenses, online subscriptions, and any software that you use like PhotoShop.
Consider that 1 in 5 people will start a small business, so that amounts to a lot of startup costs. Don’t forget all of the expenses to advertise and market your business including any pay-per-click campaigns or ads that you run on or offline.
Look for Self-Employed Editions
Having a CPA handle your taxes is obviously more expensive than doing them yourself. You might save a couple hundred dollars or more by using one of the top brands of tax software like H&R Block or TurboTax.
However, don’t go with their “Deluxe” or even “Premier” Editions as they probably won’t be adequate for you as a freelancer or small business owner. Instead, I recommend the Self-Employed Editions which cost more but find more potential tax deductions.
OK, good luck with your taxes! Remember, this isn’t tax advice. So, do your own research and file early if you can!