Updated: Feb 25, 2020
Twenty percent of people in the US are self employed in some capacity and more than half of us want to be our own boss. If you are one of the lucky ones that made the leap and worked as an Independent Contract Therapist in 2019, here are some quick things to think about before April and tax season is upon us.
Your Business Earned Money….. Not You
It’s important to understand that you do not earn wages as an Independent Contractor; instead, what you earned was business income and this is what is reflected on your 1099-MISC which, by the way, was due to you by January 31 if you earned more than $600. You will be responsible to pay all estimated taxes to the IRS on this money. Earned less than $600? You still must report the income.
Your Business Will Pay Taxes….
Your business tax return is where you will pay both federal and state income tax on the money you earned for working as an independent contractor. You will also owe self employment tax.
You Will NOT Freak Out
While the tax implication sounds scary, the upside is that you can deduct any and all expenses that have a specific business purpose AND that you can prove were business expenses in case of a future audit.
We summarized some of these in an earlier blog but there’s a quick list at the end of what you should have on hand to get ready to file (not a fully list of every potential qualifying deduction, but a good start).
If you are having a hard time finding what you need, take a deep breath and try some alternate resources. Go through old emails to see if you can find anything that triggers your memory, check your calendar for dates and go through your version of a junk drawer.
… and you WILL get organized for 2020
It’s a new year and you have time to make a fresh start. Make sure you have a system that helps you stay organized and stick with it. It can be as simple as an envelope on your desk and in your car to store receipts or we have found that many therapists love using QuickBooks which makes it easy to track your mileage and scan receipts. Also, know that the organization will be worth the effort so you keep every penny of your hard earned money.
What To Organize Now
· Invoices/statements to clients
· Statements for services received
· Bank Statements
· Credit card statements (consider using just one card for business expenses)
Taxes & Professional Fees
· Business Tax Receipt
· Professional License
· Liability Insurance
· Continuing Education
Goods & Supplies
· Receipts for all items that have a “business related purpose”
· Cell phone if used for work
· Computer or office supplies (including maintenance of business items)
· Qualifying medical costs
· Professional fees (attorney fees, accountant fees, etc.)
· Maintenance Records
Home Office Deduction
· Mortgage Interest Statement / Rent
· Utility Statements
· Receipts for home office improvements
Let us know if you have any tips to share. Also know that ITA Members get a whopping 50% off your first six months of membership for QuickBooks for Self Employed.
How great is that?
Let’s succeed together. Come join us for help, resources... and great discounts.