A Few Tax-Simplifying Tips for Freelancers

Any growing business is easy to run when you have professional help, from managing cash flow and planning personal finances, to finding insurance.

While becoming your own boss is exciting, the extra work that you have during tax season can crush that excitement. If you are a full-time freelancer or are starting a side gig, the three tips listed below can help you get prepared for tax season.

1. Be Ready for More Forms

Be aware of the fact that your net profits are taxable. Get familiar with Schedule C—the form where sole proprietors report their business income and expenses. Also, keep in mind that you might need Schedule S.E. to calculate your self-employment taxes.

Hiring a professional accountant for freelancers is a great way to alleviate your tax hassles. However, if you are willing to do it yourself, then you need to be organized, confident, and operational in your specific business.

2. Get Organized

With self-employment, while you experience the excitement of managing your own business, you should also understand that your income is never constant, and often fluctuates. So, to avoid surprises during the year, estimate your tax liability. This way, if you are ever audited, you will be forced to prove the income and expenses on your tax return. To avoid such troubles, keep consistent records and save your financial documentation for at least three years.

Tip: If you feel helpless or stuck with your taxes, then employ income tax services for the self-employed from reliable professionals.

3. Understand 1099-NEC Forms

If your client pays you $600 or more during the year, you should probably get a 1099-NEC Form from them in January or February. This form demonstrates how much your client paid you over the tax year, for which you are required to report. Be as transparent as you can, because your client has the power to send a copy to the IRS, and the IRS will know what they paid you… even if you don't report that income on your tax return.

These are a few tips for freelancers in order to avoid further stress during tax season.

Common Questions that Arise Regarding Airbnb Tax Preparation

One of the most important questions that new Airbnb hosts face is how to report Airbnb income on your tax return. The professional Airbnb hosts that are earning a significant amount of money from the platform need to be proactive about Airbnb tax preparation. Here are a few questions and Airbnb tax preparation tips that can clarify any confusion you have regarding the process.

Do I have to pay Airbnb taxes on Airbnb income? 

Unless you rented your house out for less than 14 days and used it for more than 14 days yourself, you would have to pay Airbnb taxes on Airbnb income. And if you rent it out for less than 14 days and don't pay taxes on it, then you are not eligible for any deductions. 

What are the Airbnb taxes for a private room? 

If you don't rent out the entire property and instead rent private rooms for more than 14 days, you will have to calculate how to share the expenses with your personal use. This is when having an accountant can be beneficial for you. Hire someone who can calculate Airbnb tax deductions for you. 

Should I attempt to do my own Airbnb tax preparation? 

In every tax preparation guide for artists and entrepreneurs, it is recommended that you do not do your own Airbnb tax preparation unless you only have one property. But even then, it would be comparatively easier to submit all your income and deductions to an online tax preparation service. We cannot stress how important it is to hire a professional for Airbnb tax preparation! 

These are some of the common questions that might spring up while tackling your Airbnb tax preparation. Get in touch with Agro Accounting CPA at agroaccounting.com to learn about the process in detail.