The biggest advantage of being self employed is the freedom of choice and flexibility. Although at one side owning your own business has a lot of advantages, but there are many added responsibilities too. As a self-employed individual, you do not have employer withholding taxes from your paycheck instead; you must handle these obligations on your own.
The self employed individual gets a lot of tax advantages. Here are some tips that are beneficial when filing tax returns as a self employed individual:
Tip No. 1: Take advantage of the available Tax Deductions
One of the biggest benefits of being self-employed is the ability to deduct certain expenses that other individuals usually cannot. Some of these benefits include tax deductions for your home office, the business use of your vehicle, and supplies purchased for your business.
Tip No. 2: Keep in mind that you are filing returns as a business entity
Whether you are a freelancer, a designer or an online service provider, you need to realize that you are a business. It is not necessary that you need to have a physical presence to become a business. You should be keeping financial records like a business. This means creating monthly profit and loss statements, recording all expenses, and keeping detailed records of all payments received.
Tip No. 3: Keep Your Business account completely separate from your Personal Accounts
One of the most common mistakes made by self-employed individuals is not having separate accounts for their business income and expenses. Putting payments from your clients directly into your personal bank account is bound to cause confusion when it comes to tracking your business transactions. It is necessary that you keep a separate account for your business transactions.