Are you self-employed? If so, it’s important to understand the tax filing process. Unfortunately, many people make mistakes when filing their taxes, which can lead to penalties and fines. In this post, we will discuss 5 of the most common mistakes made by self-employed tax filers.
Mistakes Self-Employed Tax Filers Can’t Afford
Self-employment has many perks, but there are also some unique challenges, especially when it comes to tax time. Here are five common mistakes that self-employed taxpayers can’t afford to make:
#1 Not Keeping Accurate Records
- When it comes time to file taxes, many self-employed individuals dread the thought of sorting through their financial records. However, not keeping accurate records is a mistake that self-employed tax filers can’t afford to make.
- The IRS requires taxpayers to keep accurate records of their income and expenses to substantiate their deductions. Failure to do so can result in penalties and interest charges.
- Additionally, accurate record-keeping can help self-employed taxpayers avoid disputes with the IRS. By keeping good records throughout the year, self-employed taxpayers can save themselves a lot of headaches come tax time.
#2 Not Filing Quarterly Taxes
- One of the biggest mistakes self-employed tax filers can make is not filing their quarterly taxes. When you don’t file your quarterly taxes, you end up owing a large sum of money come tax time.
- This can put a strain on your finances and may even lead to late fees and penalties. Additionally, if you’re expecting a refund, you won’t receive it until you file your return. For these reasons, it’s important to make sure you’re staying on top of your quarterly tax filings.
- If you’re not sure how to do this, there are many resources available online or through your local tax office. By taking the time to file your quarterly taxes, you can avoid a lot of unnecessary stress and financial hardship.
#3 Not Claiming All Deductions
- When you’re self-employed, it’s up to you to stay on top of your taxes and ensure that you’re taking advantage of all the deductions you’re entitled to. Unfortunately, many people make the mistake of not claiming all the deductions they’re entitled to, thinking that it will somehow result in a smaller tax bill.
- But the truth is, not claiming all the deductions you’re entitled to can end up costing you more in taxes than if you had just taken them in the first place.
- By not claiming deductions, you’re essentially overpaying your taxes and leaving money on the table that could be used to grow your business or invest in your future. So if you’re self-employed, make sure you’re taking advantage of all the deductions you’re entitled to. It could save you a lot of money in the long run.
#4 Not Saving For Taxes
- As a self-employed individual, it’s important that you set aside money each month to cover your tax liability. While it may be tempting to spend all of your income if you don’t save for taxes you could end up owing a large sum come tax time.
- Not only will you be responsible for paying the taxes owed, but you may also be charged interest and penalties. Furthermore, if you’re unable to pay your taxes in full, the IRS can take steps to collect the money owed, which could include levying your bank accounts or garnishing your wages.
- In short, not saving for taxes is a mistake that self-employed tax filers can’t afford to make. By setting aside money each month, you can ensure that you’ll have the funds available come tax time.
#5 Filing Late
- Many self-employed taxpayers make the mistake of filing their taxes late. This can result in significant penalties and interest charges, as well as damage to their credit score.
- Additionally, the IRS may also seize assets or place a lien on the property to collect unpaid taxes. As a result, self-employed taxpayers must make sure they file their taxes on time.
- Filing early can help to avoid some of the penalties and interest charges, and it can also give taxpayers more time to save up the money they need to pay their taxes. So if you’re self-employed, don’t wait until the last minute to file your taxes – it’s a mistake you can’t afford to make.
As a self-employed individual, you have several important things to keep in mind as you file your taxes. By following the tips we’ve outlined in this article, you can make the process much less daunting and ensure that you are taking advantage of all the tax breaks available to you. We wish you luck as you move through this process! Thanks for reading!