- Guest Contributor
- January 10, 2022
Does tax season always seem to leave you in a tizzy? Do you end up wishing you would have been better prepared for the filing process? If so, now is a great time to start thinking about how to get your taxes squared away without the stress. With that move, you can complete your taxes faster than ever before and send them in with confidence that you checked every box. Ready to get started? Here’s what to do.
1. Understand Your Tax Burden
If you embraced that independent worker life, you’ll pay a bigger percentage of your income to taxes than in your W-2 days. The reason? Self-employment tax.
As an hourly worker, your employer paid half of the 15.3% tax rate for Medicare and Social Security. Once you become self-employed, you’re responsible for all of it, resulting in a higher tax bill at the end of the year.
On top of that, you have to pay your federal and state taxes. For federal taxes, you pay a certain percentage of your income based on your tax bracket. State taxes, on the other hand, have a flat rate, progressive tax, or none at all.
2. Maximize Your Deductions
You can reduce the total percentage of your income paid to taxes by maximizing your deductions. You should speak with an accountant to see which deductions you’re eligible to claim.
The most common deductions for independent workers are:
- Home office
- Transportation
- Marketing
- Equipment
- Office supplies
You’ll need to keep receipts for all your deductible expenses. Furthermore, it’s wise to track your costs of doing business in a spreadsheet each year. To make it even easier to keep track, consider opening a separate bank account for your gig worker income and purchases, like indi for Jobblers.
3. Save Enough Money for Taxes
If you’ve been paying your estimated taxes each quarter, you likely already paid all your taxes for the year. If not, then you should have at least 30% of your income socked away for your tax payment once you file.
You can make sure that you always have more than enough money saved for your tax payments by automating your savings. Through your indi for Jobblers account, set an automatic savings percentage and that amount will come out of each payment. You can then watch your savings balance grow without having to lift a finger.
As your independent worker income increases, bump up the percentage to build an emergency fund and even start saving for retirement. Before you know it, you’ll have a large amount of money going into your rainy-day fund, so you don’t have to worry about taxes or any other intermittent expenses.
The Time to Stop Dreading Tax Season is Now
Tax season comes around every year, but that doesn’t mean you have to dread it. Just remember the tips in this guide to avoid getting caught off guard and you’ll handle your taxes like a pro each and every time. And remember: there are tools out there made specifically for workers like you.
About the Author: Marie Abendroth is a skilled content strategist and SEO copywriter who has been a proud part of the gig economy for over 10 years. In her articles, she aims to provide up-to-date info that can help everyone achieve their goals as an independent worker. You can find her on WriterAccess.
