Retirement Daily’s Robert Powell caught up with Jeffrey Levine, CPA and tax professional from Buckingham Strategic Wealth Partners, to debate prime tax ideas for freelancers and gig economic system employees.
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3 Tips for Freelancers and Gig Workers
- Make certain you’ve gotten that plan in place to pay estimated tax funds on time that will help you keep away from penalties and curiosity.
- Decide what kind of entity you need to your gig work
- Create your personal retirement plan.
Recommended Read: Self-Employment Taxes in Today’s Gig Economy
Quotes| Top Tax Tips for Freelancers and Gig Economy Workers
Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth
Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth
Recommended Read: TurboTax Tax Tips for Gig Economy Workers with Multiple Jobs
Video Transcript| Jeffrey Levine, CPA and Tax Expert, Buckingham Strategic Wealth
Robert Powell: Are you a gig employee or a freelancer? What do you could learn about your taxes? Jeffrey Levine from Buckingham Wealth Partners is right here to speak tax ideas with me. Jeffrey, what do freelancers and gig employees have to know?
Jeffrey Levine: Hey Bob. Well, I’d say there are three issues that sort of bounce off the web page at me. The first is gig employees are oftentimes paid as 1099 unbiased contractors versus as employed people who obtain a wage. And when you’ve gotten a wage, you usually have revenue tax withheld from that wage. So you are sort of paying your taxes all year long sort of by default. Well, with funds as an unbiased contractor, usually, these federal withholdings, and state withholdings do not occur. And you are liable for paying it your self, sometimes by way of estimated taxes which might be usually paid quarterly. And so this can be the primary time these people must cope with that. Making certain you’ve gotten that plan arrange and are paying these funds on time will enable you to to keep away from penalties and curiosity down the street.
The second factor is what kind of entity would you like to your gig work? Now the only type could be simply your self, a sole proprietorship. That’s simple and it is environment friendly. The problem is that there are specific issues that you aren’t getting the advantage of. For occasion, you are going to pay employment taxes on your entire income. By distinction, in case your gig job is absolutely taking off, chances are you’ll wish to arrange an S company to assist protect a few of your income from the enterprise from the identical self-employment taxes. There are all kinds of causes to have completely different authorized buildings, a few of which contain taxes, and a few contain asset safety. So considering by way of that as to what’s the very best course for you is the second.
Finally, the third factor I’d add is when you’ve got your personal enterprise, you’ve gotten a very wonderful alternative to create your personal retirement plan. And even when you’ve got a day job some other place, so to talk, that has 401(ok) that you simply take part in, you possibly can nonetheless create a SEP IRA, as an example, to your separate gig work to get extra {dollars} in to assist save to your retirement down the street.
Editor’s Note: The content material was reviewed for tax accuracy by a TurboTax CPA professional.
Zach Faulds contributed to the writing of this text and produced the video and/or the graphics related to it.
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