The Gig Economy is growing.While the working world is changing, the one thing that remains the same is that all workers must pay taxes. If you are working as a contractor or freelancer, you may have to pay the IRS for self-employment tax. One question that all members of the Gig Economy should ask themselves is whether they are saving enough for taxes? Continue reading to learn about paying taxes in The Gig Economy.
As a freelancer or contractor, you may be providing a service to someone else. However, the Internal Revenue Services considers Gig Economy workers as self-employed. You may wonder what this means during tax time? It means that you are still responsible for the taxes that your employer would normally pay on your behalf.
Since you are considered a self-employed worker, it may be required that you file an annual tax return and pay an estimated tax quarterly. You may also have to pay a self-employment tax which pays for Social Security and Medicare. Since you are self-employed, the taxes aren’t taken out of your initial pay, so they must be paid to the IRS later.
The IRS Schedule (Form-1040) allows self-employed workers to calculate the taxes they owe on their net self-employment pay. After you fill out this form, the Social Security Administration is able to determine your benefits through the social security program. If you prefer to avoid a big bill at the end of the year, you can choose to make quarterly payments. These are refereed as Estimated Tax payments.
To see if your income is subject to self-employment tax, you can take a test from the IRS. All you need to know is the type of self-employment income you’ve made and your net profit or loss from your self-employment income.
Each time you get paid, you should save between 25-30 perfect of your self-employment income. This will help you pay off that large tax bill at the end of the year. If you end up not owing taxes at the end of the year, you can use those savings for something else.
The Family Credit Union is here for all your financial needs! Contact us today and we will be happy to answer any questions that you have or provide you with more information on our services. We look forward to hearing from you!
The Family Credit Union has partnered with TurboTax to help you file your taxes confidently and easily. TurboTax will help you get your biggest possible refund. If you use the TurboTax Federal Free Edition, Family Credit Union members can prepare, print, and e-file their taxes for free!
The majority of the provisions in the new Tax Reform bill will affect your 2018 filing, not this year’s, but there are some things to look out for. Here are some tips from Intuit TurboTax.
If you have any property acquired and placed in service after September 27, 2017, you can expense certain pieces up to 100%. The bill also has eliminated the provision that the piece of property could not be used. The bill also includes film, television, and theatrical productions as qualified property, if released after September 27, 2017.
If you currently itemize your deductions, you can deduct qualifying medical expenses that exceed 10% of your adjusted gross income. The medical deduction remains, but has a lower floor of 7.5%.
Personal Casualty Losses
The tax break that this pertains to is retroactive to 2016 and includes the losses in any federally declared disaster area.
State and Local Taxes
Some people that have more than $10,000 in property taxes or state and local taxes have been trying to pay now to get the full deduction on their 2017 taxes. The new tax bill prohibits you from prepaying 2018 state and local taxes that were not imposed in 2017.
Turbo Tax is ready to help you file and get through all the changes that are taking effect in the new tax year.
You may have heard about people calling and pretending they are from the IRS in order to gain your personal information or you’ve received a letter from the IRS stating that a tax return was already filed under your social security number. In both cases, scammers are trying to get your money that you worked hard for. Don’t let them win!
The IRS and state tax authorities will never initiate contact via the phone, email, or social media outlets. They will always contact you by mail first. In addition, they will not require you pay your taxes by a particular method. Be suspicious if the person insists you use a certain payment type, such as a prepaid debit card.
The IRS will contact you by mail with a bill first and they won’t demand immediate payment. If you receive a call like this, report as much information as you can to the police department. Try and get a phone number before they hang up.
You can learn more about protecting yourself from tax scammers by clicking HERE.