1. Track your income. Even if you are paid by someone else, they may not send you the appropriate 1099 forms. It's your responsibility to track and report your income.
2. Pay your Social Security and Medicare Taxes. You need to pay 12.4% of your income up to $132,900 (this amount increases each year). Medicare tax is 2.9% of all income.
3. Check estimated taxes. Self-employed typically owe quarterly taxes if total income is $1,000 or more; you can't wait until the tax is due or you will be penalized. If you also have a wage job you can increase your withholding on wages to avoid having to pay estimated quarterly taxes.
4. Keep good records. Be especially careful with mixed-use assets such as a vehicle which is used for both work and personal travel. Commuting is NOT a deductible expense.
5. Review deductions. Learn what business expenses are deductible and keep detailed records to support deductions.
6. Look at depreciation. Some business expenses such as computers and other equipment can be depreciated and deducted over a time span.
7. Arrange health insurance. Self-employed can deduct health insurance costs on line 29 of Schedule 1 of the 1040 form. Consdier setting up a health savings account (HSA).
8. Check eligibility for the new 199A tax break. 2017 tax bill added a 20% deduction of net income but limits it to taxable income of $160,700 for singles and $321,400 for couples filing jointly.
9. Be aware of retirement plan deadlines. Self-employed can invest up to $50,000 in a SEP-IRA or Solo 401(k). But pay attention to deadlines.
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