Does a U.S. Presidential Election Impact Stock Market Performance?
02/05/24
Reasons People Fall Off Their Retirement Track
03/05/24
With the 2023 tax season underway, some individuals may be under intense pressure to complete their return. This pool of individuals includes independent contractors and those who are self-employed. Reporting income on a Schedule C can be much more complicated than simply entering W2 wages on your 1040. Listed below are a few tips to aid self-employed individuals with effectively navigating tax season completing their return:
- Run a mock Profit & Loss statement to determine estimated net income. After assessing the figure, determine the tax owed to IRS and the State, if applicable.
- Total all estimated tax payments paid throughout the year. If more tax is owed since estimates were low, having more time to plan is beneficial.
- Have receipts and any logs (e.g., mileage) in an orderly fashion so entry on the return can be smooth after totaling all expenses.
- File an extension even if it’s not needed. This is especially important if a self-employed individual does not have a SEP IRA established. The extension will allow more time to make a tax-saving contribution.
- An extension will also aid in the assessment of penalties if total tax is not paid by the deadline.
- Keep all records/receipts in digital format, or in a safe place just in case of a future audit. I suggest scanning all 1099s/bank statements/receipts/invoices in PDF format.
To wrap up, it is important to stay organized when preparing your return. Using a segmented approach is extremely useful. Totaling gross sales/revenue gives you the starting point before expenses. After that, keep expenses segmented per classification. For example, total all advertising expenses separately in one pile, then move to total supplies, and so on. Even though the process can be daunting, using your own organized approach can limit a great number of headaches at tax time.
Disclaimer:
Expressions of opinion are as of this date and are subject to change without notice. Any information provided is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation to buy, hold, or sell any security. There are limitations associated with the use of any method of securities analysis. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Every investor's situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Past performance does not guarantee future results. Investing involves risk, and you may incur a profit or loss regardless of strategy selected. There is no guarantee that any statements, opinions, or forecasts provided herein will prove to be correct. Dividends are not guaranteed and must be approved by the company Board of Directors. Indices are included for informational purposes only; investors cannot invest directly in any index. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Blue Chip Partners, Inc. we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Image credit/ Getty Images
