Tax Tips for Freelancers

backgroundshape
Live webinar took place on 03-08-2022 @ 03:00 PM ET
Ro Williams
DeMei Vaughan-Anderson

If you’re self-employed as a freelancer or a contractor, you already know doing taxes for your business isn’t easy. But do you know there are hundreds of expenses you could deduct (write-off)? Find out more about that, plus more great tips during our 30-minute webinar with Ro Williams.

Ro Williams is the Tax Research Manager at ComplYant. She is an experienced professional in the tax industry and has previously held positions at an International Law firm and Public Accounting firms.

Note: This topic covers U.S. business taxes only.

Recording Highlights

  • 3:40 - Business entity formation
  • 7:20 - Industry Type
  • 10:47 - Accurate Accounting
  • 12:57 - Business Banking
  • 14:54 - Sales Tax License
  • 16:47 - Bonus: 1099
  • 19:37 - Q&A

Q&A

What type of expenses can home businesses or family businesses write off?

Whichever expenses this qualifies in their industry type. That's what we're looking for. We're looking for ordinary and necessary expenses within your industry type.

Necessary doesn't have to mean "my business will fall apart and burn down if we don't have these things," but it does have to be needed for the business to function. It's like hiring that extra body at the workplace. You may not be behind in work, but you don't wanna get behind in work.

Just make sure the expenses are common to your industry. And if you have to think about it twice, I would avoid it. If you have to take a step back and say, "I don't know," then it's a no.

What percentage of total net profit from an S Corp can be set as your salary?

There isn't a set percentage of the total net profit. The IRS will look at what is reasonable for that person in that geographic location to live in-- that's how specific it is. So, if you live in Los Angeles, your salary is gonna be different than someone who lives in Oklahoma City. We're in two different places, two different geographical locations, and two different population types. The salaries are going to be different. So, you look at the median in that area. And if what your business is producing cannot meet that median, then you essentially don't qualify.

That's not saying you can't make the election. However, if you get audited, you're gonna have to pay all that money that you made those savings on back. If you get audited, you're gonna have to pay all the taxes, the self-employment, all the FICA on that. And then what else comes with being audited? Penalties come, and interest comes.

So just make sure that the salary that you take from the S Corp in order to make it S Corp is reasonable enough for a person.