If you work as an independent contractor in the maintenance area or perform similar work (plumbing, gardening, electrical work, carpentry, etc.), you will most likely be considered as a "self-employed sole proprietor" in the eyes of the IRS.
Knowing this is important as you will have to pay taxes on the profits you generate by doing these jobs as a freelancer, and you will be able to claim certain tax deductions that vary depending on the costs you have incurred in order to perform these jobs.
When you are self-employed, you must file Form 1040 with the IRS; however, earnings are not reported on line 7 (Salaries, salaries, or tips), but on line 12 of the form, as business income. It is important to know that you should not report the total income you earned for your work, you must first use "Schedule C" to calculate the net profit after calculating all the tax deductions you can claim.
Here are 3 tax tips to help you get the most out of your income and have an easy, headache-free tax season.
If you incur in any expenses that help you do your job as a plumber, carpenter, electrician, gardener, etc., you may be able to deduct this expense on your tax return. Some expenses that can be deducted are:
As self-employed, you will have to pay taxes as "Self-Employed." These taxes are currently set at a rate of 15.3%. This includes the Medicare and (2.9%) Social Security. (12.4%) contributions.
You may also need to make estimated tax payments to the IRS during the year, which vary depending on your tax payment projections for the upcoming tax season.
Saving receipts, contracts, and any documentation you generate will be very important to be able to file your tax return. Recording the earnings and expenses you incur will also be equally important. Tips for keeping a much cleaner record of your income and expenses include:
Do not hesitate to contact us at info@gbsgroup.net or book a free call with us if you need advice with your taxes, accounting, bookkeeping or business development. Our team of experts can help you.