As the COVID-19 pandemic hit, employees across the globe were compelled to leave their conventional 8 to 5 jobs. The movement surfaced as The Great Resignation last year. A massive number of employees resigned from their jobs and looked for other available options.
One of the most efficient alternatives to 9-5 jobs turned out to be self-employment. Given the Coronavirus restrictions, these employees were destined to work remotely. In turn, this posed yet other challenges. That is why the Great Resignation came to the surface, and self-employment remained the only option.
As self-employment became “a thing” last year – as it is today – new self-employed individuals are unaware of the ins and outs of self-employment. Among those challenges, taxes and deductions remain the commonest. If you are self-employed, and you are unaware of the taxes of self-employment, you have got our back.
What Self-employment Taxes can you expect as a self-employed?
As mentioned earlier, self-employment comes with challenges, and self-employed newbies are unaware of them. And taxes are no exception. Here are three essential elements of taxes for self-employed individuals:
- You need to file a tax return if your gross earnings are above $400. Meaning you are destined to pay self-employed taxes if you earn more than $400.
- If you make an income of $550 or more than that, Form 1099-NEC keeps proper track of that. Again, you are supposed to pay self-employed taxes.
- As a self-employed person, all of your incomes, taxes, and deductions will be gathered in a file called Schedule C.
These three essentials entail that as a self-employed, you need to be pristinely clear on the tax terms. Violations of any of them may put you in hot water.
Is there any deduction of taxes for self-employed?
Well, the good news is yes. There are certain terms and conditions for self-employed that make them eligible for a deduction from their taxes. For example, if you are starting your own business, you can deduct the charges for your office equipment, set up, monthly bills, and your employees’ expenditures.
A widely unknown tax trick for the self-employed is counting setup expenses in their taxes. Meaning, you can legally consider your overall business expenditures and deduct them from taxes.
Similarly, if your business is home-based, you can deduct the Home-Office Deductions from your taxes. Though this may not include the building, setup, and travel perks, it definitely counts office essentials. These office essentials can be desktops, WiFi, electricity bills, furniture, and other equipment that you use to get your work done.
Nevertheless, self-employed individuals can also utilize the benefits of conveyance in deducting their taxes. For instance, if you supply your products and services through driving, or you simply drive your own car to provide your service, you are good to deduct these travel expenses from your taxes.