Independent contractors are subjected to unique tax laws that can have serious implications if you don’t carefully navigate them. In fact, we often see independent contractors face significant tax debts that are hard to get a handle on and that negatively impact their businesses for a long time to come. If you want to avoid that from happening to you, then make sure you don’t make some common errors when handling your income.
Mistakes that independent contractors should avoid when dealing with taxes
There are a lot of mistakes that can be made when you’re handling your own taxes. When you’re an independent contractor, this includes the following:
- Simply forgetting the obligation to pay self-employment tax, which can lead to the accumulation of a significant amount of unpaid taxes.
- Not making mandatory quarterly anticipated tax payments, unless your tax payments from other lines of work will fully cover your tax obligation.
- Misusing the home office deduction, as this space needs to be used exclusively for your business.
- Not fully utilizing retirement savings accounts to reduce tax obligations.
- Failing to report independent contractor income.
- Not writing off all business expenses.
- Writing off expenses that aren’t related to your business.
- Maintaining incomplete income records.
These are just some of the errors that you could make as an independent contractor and that could increase your chances of being audited. And if you are audited, then you could be hit with a massive tax bill if you’ve been mishandling your self-employment income and taxes.
Don’t let the tax system devastate your financial future
If you’re not careful, then your tax obligations can quickly eat away at your financial well-being. To try to sidestep that outcome, you need a handle on tax law and how it applies to your set of circumstances. If you need assistance with that, then please read through our website and consider what else you need to address the issues you’re facing.
