Independent Contractors, Self-Employed, Sole Proprietors - That’s You
If 2020 has taught us anything, it’s to prepare for the unexpected. How might you do that? Well if you have recently started a side gig to earn extra income, now is the time to compile your financial information to complete the IRS Form 1040, and we can help you do that!
Our foxtastic team at Blue Fox has created multiple resources to help our friends who have a side business [Schedule C Form and Tax Prep video]. We also wanted to share more tips on how to handle taxes for your side hustle. Most people who start a new opportunity invest all their extra time in growing this venture; we’re here to help you with the other fun stuff like taxes.
Below are 3 tips on best managing taxes for your side business.
1. Stash cash every payday
If you’re used to getting a paycheck from your employer with your taxes withheld, you will have to start taking on that responsibility on your own. Don’t worry, we’ll help you with how much to put aside.
In general, put aside 25 to 35 percent of your income. Always make sure to consult with a tax professional [wink wink, us] about how much you’ll need, especially if you are making quarterly payments to the IRS. Small business owners pay quarterly taxes on January 15, April 15, June 15 and September 15.
2. Keep a keen eye on expenses
Make sure you are tracking your costs throughout the year. You could do this on your own in a spreadsheet or use something specifically designed for those who are self-employed like QuickBooks Self-Employed to separate business and personal expenses, give you quarterly estimated taxes and automatically track your mileage.
Tracking your expenses pays off [literally]. Your professional tax services provider can help show you deductions that you’re eligible for including things like a home-office, mileage, and materials and equipment bought and necessary for your business.
3. Hire a Pro
Working with a professional to help you with your tax plan is a great investment in yourself and a new venture. At Blue Fox, we have helped our sole proprietors or single-member LLC clients save thousands of dollars and keep their audit risk low by asking us for help at tax time.
Another group of our clients have taken their side hustle to a whole new tax advantaged level by becoming S-corporations. We love using legal strategery (yes, we know that’s not a word) to proactively help people maximize their tax refunds. [Read more about that here.]
It wouldn’t be 2020 if there wasn’t complication so we think it’s best to reach out to a tax expert [hey, we would love to help] to ensure you are on the right track with the behind-the-scenes side of your business.
If you’re looking for a human person to talk to about tax planning, that’s us. Let’s connect at (321) 233-3311 and firstname.lastname@example.org.
The Best Way to Track Income & Expenses for Tax Form 1040
Sole proprietors: get out your shoebox of 2020 receipts and let’s get organized. Our team at Blue Fox created this handy Schedule C Worksheet for your profit or loss record-keeping pleasure. If you’re wondering how to fill out the Schedule C Form 1040, this easy-to-use tool will get your financial ducks in a row. We highly recommend using it before you attempt the official IRS form.
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