Particularly if you are a freelancer, filing your taxes may be a difficult affair. You must pay self-employment tax as a freelancer, keep account of your earnings and outgoings, and submit anticipated tax payments all year long. Although it can seem difficult, you can complete an IRS Form 1040 with a little assistance and use a quarterly tax calculator. We’ll guide you through completing a Form 1040 in this post, as well as provide some advice on how to save the most money on taxes.
1. Gather your papers
You must acquire all the required documentation and information before you can begin filling out your Form 1040. This includes your W-2s, 1099s for any freelancing work you conducted, receipts for any planned tax deductions, and any other financial documents you may have. The Social Security numbers of any dependents you want to claim, as well as your own, are also required.
2. Check the Status of Your Filing
Your tax rate and the amount of your standard deduction depend on your filing status. Based on your marital status, the number of dependents, and other circumstances, determine which filing status applies to you.
3. determine your gross income
The overall money you brought in for the tax year is what is known as your gross income. This covers all compensation, such as wages, salaries, tips, and self-employment earnings. Bring together all of your income-related documentation and tally up your earnings for the tax year. Include every single source of revenue from your freelancing work.
4. Take Your Adjustments Out
You may low fee super fund your taxable income by taking adjustments as deductions. If you are self-employed, they also cover health insurance premiums, student loan interest, and IRA contributions.
5. Pick Your Tax Deductions
You may lower your taxable income by deducting certain costs. Standard and itemized tax deductions are the two different categories. Regardless of your filing status, the standard deduction is a fixed dollar amount. Amounts like mortgage interest, charity donations, and state and local taxes are examples of itemized deductions that you may claim. The deduction that saves you the most money on taxes should be chosen.
6. Calculate Your Taxable Income in Step Six
Your taxable income will be calculated by deducting either your standard deduction or your itemized deduction from your AGI. This sum of money represents your taxable income under federal law.
7. Choose Your Tax Credits
They consist of the education credits, earned income credit, and child tax credit. To reduce your tax obligation, find out the tax credits you are eligible for.
Determine Your Tax Liability
Your tax burden is the total of your tax obligations, net of any payments or credits.
Check Your Anticipated Tax Payments
You must make estimated tax payments throughout the year if you are self-employed. Make sure you paid enough throughout the course of the year by checking your projected tax payments to prevent underpayment fines.
10. Completion of Schedule
Your self-employment income and costs are reported on Schedule C, the appropriate form. Use Schedule C to figure out your self-employment tax, which is based on your net self-employment income. You will also owe ordinary income tax in addition to this.
11. Total Your Payments and Credits
Include all of the payments you made during the year, such as anticipated tax payments and any taxes deducted from your income. If you are eligible, deduct any tax credits. Your total payments and credits will be shown in here.
12. Determine if you are due a refund or owe one
Total payments and credits should be compared to your overall tax burden. You will get a refund if your contributions and credits are more than your tax obligations. You will be required to pay more tax if your tax due is higher than your payments and credits.
13. Upload Your Return
Sign and date your return when you’ve finished filling out Form 1040 and any required attachments, and then submit it to the correct IRS address. For your records, be sure to save a copy of your return and any supporting documentation.
Advice on How to Save the Most on Taxes
So that you may optimize your tax savings as a freelancer, let’s talk about how to fill out a Form 1040 now that you know how to.
Using tax deductions is a good idea
You may be able to deduct a variety of costs as a freelancer from your taxes, including business travel, office supplies, and office equipment. Aim to maximize any applicable deductions by keeping track of all your costs throughout the year.
Make tax payments that are estimated
Self-employed people are required to make anticipated tax payments throughout the year, as was already established. Keeping track of your tax obligations and avoiding underpayment penalties are both made possible by doing this.
You Might Want To Include
A reduced tax rate on your self-employment income and the capacity to write off more company costs are just two of the additional tax advantages that incorporating your freelancing firm may provide. If you’re not sure if incorporating is best for you, speak with a tax expert.
Employ Tax Advantaged Retirement Accounts
Making contributions to tax-advantaged retirement plans, such an IRA or a Solo 401(k), may help you lower your taxable income and boost your tax savings. If you are qualified, be sure to use these accounts.
And That’s It
The process of completing a Form 1040 might be scary, but with little preparation and help, it is rather simple. There are several tactics you may use to assist lower your tax bill, even if you may encounter particular hurdles as a freelancer while trying to maximize your tax savings. You may keep more of your hard-earned money in your wallet by taking advantage of tax deductions, paying anticipated taxes, thinking about incorporation, and using tax-advantaged retirement funds.
