Would you like some good news about the 2017 tax season? There are three extra days to complete and file taxes! April 15 falls on a Saturday, and Monday, April 17 is a Washington DC observed holiday, Emancipation Day. That means the tax deadline is pushed to the next business day, Tuesday, April 18, 2017, a date so far away that it lulls us into thinking we don’t have to do anything about our taxes just yet. But don’t let that far-off date fool you.
Even though the end of the year is still several weeks away, it’s never too soon to start thinking about your taxes, especially if you’re self-employed. In fact, you could lower your stress levels AND your tax bill by prepping for your taxes now. Here’s why.
Learn about Your Tax Situation
For most deadline-driven professionals, the annual tax filing deadline feels like a great excuse to push off tax-related activities until well into 2017. But starting early gives you a chance to learn everything you’ll need to know over the course of several months.
What do you need to start researching and learning about?
- Your self-employment income for 2016
- Common deductions and expenses for your self-employment field
- Whether you have any clients who owe you money
- How to submit your taxes and when
One of the biggest pieces of info you’ll be looking for in this period is your income as a self-employed individual. If you made $400 or more in net earnings in 2016 from self-employment, you’ll need to pay taxes on that income. Even if your expenses put you below $400 in net income, the IRS says you may still have to file tax paperwork if you meet other filing requirements.
Start collecting everything you’ll need to accurately file your taxes. It’s great to do it along the year to save you time when filing your taxes. That includes:
- 1099 forms from any client who paid you in 2016 (which they should send to you by January 31)
- All of your work-related expenses from 2016 (with receipts!)
- Home office measurements, mortgage/rent bills, utility bills, etc. for the home office deduction (if you work from home)
If you start now, you can put together a timeline that helps you remember exactly what you need and when.
Make End of Year Work-Related Purchases.
One thing that can reduce your taxes as a self-employed individual is work-related expenses. Need to upgrade equipment like laptops and phones, subscribe to any journals or magazines, register for a class, or do anything else that may qualify as a work-related expense? Do it now, and count it as an expense that will potentially lower your 2016 net income, and potentially the amount you owe in self-employment-related taxes.
Avoid Any Last-Minute Surprises.
Nothing is worst than waiting until April to start your self-employment taxes and realizing you either don’t have the information you need, or can’t get a hold of a client who still owes you a 1099.
If you start getting your information together now, you will be ready to go online when the season opens and prepare your taxes with TurboTax.
Don’t Forget Quarterly Taxes.
If you think your tax bill for 2016 will total more than $1,000 and your total withholdings are less than 90% of the total federal tax you expect to pay at the end of the year, the IRS will expect you to start paying your taxes quarterly rather than yearly, according to Lindsay Van Thoen’s article, Got a Side Hustle? Here’s How to Pay Your Taxes. Otherwise, you may face a tax penalty.
TurboTax TaxCaster can help you estimate your tax liability before tax season begins so that you can take steps to lower your tax liability or make the last quarter estimated tax payment.
Tax season is right around the corner but, don’t worry about knowing the tax laws. TurboTax will ask simple questions about you and your business and give you the business deductions you deserve based on your answers and save you money for your business. You can also use QuickBooks Self-Employed year-round to track income and expenses, estimate taxes, and get ready for tax-time.