During the first couple weeks of April, many businesses will be putting the last-minute touches on their tax returns.
Most of those who are expecting a refund, have already completed their returns. After all, why wait? However, for those who have to pay a large sum of money, especially people who are self-employed, they might wait until the last minute to fill out their return.
Let’s be honest; taxes aren’t something most people look forward to filing. Fees aside, the process of filing is often time-consuming, and it’s also a hassle to gather all of your transactions if you haven’t organized them throughout the year.
On top of that, for most people, paying taxes is a reminder that a large sum of their money belongs to the government. As I mentioned earlier, anyone who’s self-employed can relate to this. Taxes aren’t taken out when you get paid, meaning you have to pay back more when filing your return.
Regardless of its frustrations, filing taxes isn’t the impending doom most people make it out to be. As long as you’re prepared, that is. As tax day gets closer, here are some ways you can reduce stress and manage things better.
1. Calculate Your Self-Employment Taxes
If you’re self-employed, this tip is for you. Many assume that unless they’re making thousands of dollars, there’s no need to report any of their self-employment income. However, this is a huge misconception.
Regardless of how much you make, whether it’s five hundred or five thousand, everything needs to be reported. Depending on how much you’re making as well, you might even need to make quarterly payments throughout the year.
Reporting the wrong income or avoiding your payments, could lead to penalties from the IRS, and you’ll end up having to pay even more than what you already owe. As your own boss, make sure to calculate the right amount of income you’ve made to reduce stress and give you peace of mind.
2. 1099 vs W-2 Forms
For anyone filing taxes, especially if it’s your first time, know the difference between these two forms. The former is for those who are self-employed and you’ll need to report this when filing your return.
As for W-2 forms, they are for those who have a boss and are actually considered and employee. When filling out the W-2 information during taxes, the amount will determine how much you’ll be getting back on your tax return.
3. Gather All Your Expenses
Before filing your taxes, always make sure you have everything needed to complete your tax form. Whether it’s forms related to health insurance, self-employment documents, or miscellaneous business finances, all of these are essential.
To make sure you don’t miss any documents, gather them throughout the year, and put them in a special folder. If you want to go the extra mile, you should even create a checklist. That way, by the time taxes come around, you have everything ready and prepared.
4. Be Sure to Have Health Insurance
When dealing with taxes, it’s also essential that you have health insurance.The amount you spend will vary greatly depending on whether you’re married or not. The IRS will notify you if you don’t, and adding onto that, you’ll have to pay a large penalty as well. For tax year 2016, the penalty will rise to 2.5% of your total household adjusted gross income, or $695 per adult and $347.50 per child, to a maximum of $2,085. Overall, having health insurance will ensure that you don’t have to pay any unnecessary fees.
These are some useful tips as tax season comes and goes in the next month. If you’re self-employed, calculating your income is important, and you should know the difference between 1099 and W-2 forms as well.
Finally, gather all your expenses throughout the year, and be sure you have health insurance as well. Taking these tips into consideration, will keep you stress free in the long run, so why not pull up a comfy chair, and take this load off your shoulders?