Author Topic: Tax Prep for Freelancer  (Read 1427 times)

wallabyjoe

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Tax Prep for Freelancer
« on: November 30, 2014, 02:39:26 PM »
I am pulling in some freelance income this year. Nothing huge only around $2k, but enough to think about taxes. I think I have a legitimate claim to business deduction for my home workspace, but have never done any difficult/detailed tax filing before. (I've always just used TaxACT or the free TurboTax -- EZ Standard deduction etc.).

Any freelancers out there that could recommend a Mustachian way to figure this out?

Basically, I'd hate to go to a tax preparer for $200 to save $120 in taxes.

Thanks!

catccc

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Re: Tax Prep for Freelancer
« Reply #1 on: November 30, 2014, 03:10:27 PM »
Do you really only use a significant portion of your home exclusively for a $2K business and nothing else? 

When I was in public accounting, I very rarely did a form 8829.  It was a huge hassle, typically not worth the extra preparation cost, and in the opinion of several partners at the firm, and invitation for an audit. 

The only extra forms you'll need to fill out this year are a schedule C and possibly a schedule SE.  But even if you do decide to do the home office deduction, I say just go it alone, Tax Act can handle it.  Just make sure you have good support for your claim.

john c

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Re: Tax Prep for Freelancer
« Reply #2 on: November 30, 2014, 03:24:10 PM »
The real issue with self-employment income is the 15.3% self employment tax that comes off the top.  Then, after that, you pay income tax on the remainder.  Any deduction you can legitimately claim has a large benefit on the tax you will incur on the income.

There's a new, simplified method of calculating the home office deduction.  It's easier, and depending on where you live, may make more sense for you than the traditional method.  It also reduces the paperwork required to support your claim.

Also, there's no limit to the area in your home that you can claim to be a home office.  If it's just a 3'x2' workstation in the corner of your bedroom, you should take it.

Don't forget any other expenses you can legitimately apply to your business, like mileage, supplies, etc.