April 15th is looming just hours away (or at the time you are reading this it might be currently hanging over your head). Are you ready? As a freelancer or a solopreneur do you know all that you need to about filing your taxes?
Last week FastCompany invited CPA Jonathan Meclows for a live Q&A to answer all those burning questions about taxes. Here is what they learned:
1. You should save your receipts. You must keep the original or at least a scanned copy of your receipts for at least six years in case of an audit. The IRS will not accept your bank statements as proof of your spending. De-clutter and scan those puppies to the cloud!
2. Report all your earnings. You are required to report every single copper penny that you earn, regardless of whether or not you are given a 1099 for it.
3. You might have to pay estimated taxes. Seriously? FastCompany says, “If you are making a profit as a freelancer you are required to pay estimated taxes quarterly. The amount you have to pay is typically based on your income from the previous year.”
4. You can donate your time, but you can’t claim it. If you happen to be the generous type and are donating your time to a non-profit, only your expenses can be deducted as a charitable contribution not your billable time.
5. You still have to report that check even if you didn’t cash it until January. So you thought you could get out of reporting that end of the year bonus? HA! “If you received a check in December 2014 but didn’t deposit it until January 2015, you still need report it in your 2014 tax return. The income must be claimed in the year that you received the check.”
6. You can deduct health insurance as an expense. Well that’s something! As a freelancer, if you make a profit you can claim your health insurance as an expense against your gross income.
7. Don’t go overboard on those travel costs. “Excessive travel and meal expenses or low profit/loss are some of the common red flags for auditors that may prompt an audit.”