How can I save on taxes when I get paid with a 10-99?

Question

I work freelance as a photographer. Every week I send an invoice to the company I've been working for over a year. They pay me with no taxes taken out. When it becomes tax time, I'm gonna owe big time. Any ideas how to lower the taxable income?

Answer 1

Keeping very good records and accounting for all of your expenses. All of the equipment that you use can contribute to your deductions in various ways. Vehicle mileage and Home office expenses are areas to consider. Talk to other that do the same type of work and ask them about the kinds of things that they use as deductions. Meals and travel expenses when on assignment may be deductible. And the cell phone you carry for the sole purpose of getting the next assignment would be deductible. In some cases you can take a percentage of things like a computer that you use for the business and personally. Do use a professional Tax Professional and if your tax preparer is not be familiar enough with your trade to know all of the things that could be deductible ask for someone else.

Answer 2

The best thing to do is go to a pro & get set up so you know what to do, but here's some general info.

Go to www.irs.gov and print off a form Schedule C (& the instructions). Use this as a guide to see what expenses to keep track of, although all business related expenses (not just what is listed) are deductible. Make sure you keep track of all your mileage (write it down)--even mileage to buy supplies, pick up your check, check out a location where you're going to take pictures ahead of time, etc. Keep all your receipts down to receipts for getting your car washed.

Also at www.irs.gov there are forms (1040 ES) to make quarterly estimated payments. Figure approximately 25% of the net income (gross minus expenses) you make each quarter & pay it quarterly (due 4/15, 6/15, 9/15 and 1/15). Even if you set the money aside (but don't send it in quarterly) thinking you will pay it at the end of the year you could owe interest & penalty for not sending it in quarterly.

Answer 3

Hopefully, you've been keeping track of your mileage. That is a huge deduction. You need a professional tax advisor. Don't be fooled into going with Turbo Tax. As a CPA, I've had many clients who I've saved thousands of dollars that had either tried to do it themselves or bought a $30 program.

Also, stay away from the franchise tax preparer companies. They are staffed with people who take a very short course and are not equipped to properly prepare a self-employed individual's tax return.

All in all, saving a few bucks on the tax preparation fee can wind up costing you big bucks!

Answer 4

If you have no tax withholding, then you should do Estimated Tax to avoid paying penalty. Go to http://www.irs.gov/businesses/small/article/0,,id=110413,00.html to get the instruction and download the form. Estimated tax is reported on quarterly bases, with the next one due by Dec 15.

Answer 5

Get a notepad and make a LONG list of EVERYTHING you have to buy to do your job....including gas to/from, healthcare for yourself/family, etc. Expense them on your filing to lower your gross income. Highly recommend a CPA...they're a godsend if they're good.