You have just worked as a freelance developer or startup for a year. Now comes the time to do what many people dread, paying taxes. Here are ten tax tips for freelance developers and startups that will help make tax time less taxing.
1. Know your tax laws
Be aware that the IRS is always changing their rules and regulations up to the time your taxes are due. Be sure to be aware of any changes that will affect your tax deductions or income.
2. Keep track of your mileage
You can deduct your mileage for any business related travel. Be sure to keep accurate records of how far you traveled in the year. The IRS has a fixed amount for mileage so be sure you are aware of the amount.
3. Know your tax forms
There are different taxes depending on how you get paid. A W-2 will be taxed differently than a 1099. Keep accurate records of how you are paid. You will need to be able to differentiate between your incomes come tax time.
4. Keep the IRS in the loop
If you are having trouble paying your taxes contact the IRS immediately. They want their money but they are usually willing to work with you to set up a payment plan. If you don’t pay your taxes and do not contact the IRS you could suffer severe penalties and have your pay docked.
5. Tax services
It is a good idea to hire someone who can help you with your taxes. A good accountant can be your best friend during the tax season. You can find reliable tax services at Pricelisto. Be sure you are happy with your accountant and make sure they can understand the tax laws when it comes to freelance developers and startups.
6. Tax preparation fees
An accountant will charge you to process your taxes. This fee is deductible. Keep good receipts from your accountant and be sure they deduct their tax preparation fees.
7. Home office deduction
You can now deduct your home office. A home office is a space in your house that is primarily used for your business. You will need to measure the square feet of your office space and figure out the percentage of you living space your office takes up. This percentage can be used as a deduction.
If you use your computer primarily for your business, you can deduct the cost of your computer. You can also deduct phone bills, utilities, and internet. The percentage of office use determines the percentage of the bills you can deduct.
9. Office supplies
You can deduct the cost of your business computer along with other office supplies such as paper, pens, pencils, staplers, tape, and others. Be sure to keep receipts and you will be able to take this deduction off of your year-end taxes.
10. Other deductions
Both membership dues and advertising expenses can be deducted. The cost of launching your website can also be deducted. You can deduct your health insurance premiums and your liability insurance premiums.
You can avoid headaches during tax time by planning ahead and keeping track of your expenses. If you hire an accountant be sure they are aware of the unique tax laws regarding freelance development and startups. A good accountant is a great start as long as you have your receipts in order and all of your paperwork available to them. Tax time can be stressful, but if you follow these ten tips you can rest assured your tax preparation will run smoothly.