When filing your taxes, you can write off any expense that’s involved in the running of your business. This could include office rent, equipment and business travel.
The IRS states you can only write off a business expense if it’s:
ordinary – common in your line of work, and
necessary – helpful for your business (but not necessarily indispensable)
This means buying a camera is a legitimate business expense for a photographer – but not for a writer.
You can’t write off personal expenses, like groceries. But if an expense is partially personal and partially business, you can claim the business component. If you buy a new cell phone and use it for business 80% of the time, you’re allowed to deduct 80% of that cost.
Regardless of what you’re writing off, make sure you keep receipts of all your expenses. Keeping proof of your expenses will keep you out of trouble if the IRS audits you.
Tax write offs can save you hundreds of dollars a year – but they can be complicated. It’s worth checking with an accountant or tax agent to make sure you’re claiming the right things.
You need to submit a 1099-MISC form to any contractors you’ve paid during the year. A contractor is somebody who isn’t your employee, but who you’ve hired to do work for you. For example a freelance writer, designer or web developer.
The IRS uses 1099 forms to keep track of payments made to contractors. You need to mail or email the 1099 forms to any contractors your business paid before February 1. You’ll also need to send a copy of the 1099 to the IRS by February 28. If you’re unsure whether you need to submit a 1099 or not, check with an accountant or financial advisor.
Self-employment tax is the tax you pay if you’re self-employed. This is when a self employed individual pays Federal Insurance Contributions Act (FICA) tax, which includes Social Security and Medicare, by themselves.
The cost of this FICA tax is normally split between employer and employee. Because self-employed workers don’t have their taxes withheld by an employer, they have to pay both the employer and employee shares of the FICA tax. This is called self-employment tax.