By 2026, experts estimate that 10.3 million people will be self-employed.
Self-employment offers freedom, control, and creativity, but it also requires a lot of work. Some of the work involves financial management. You must track your income, expenses, and taxes if you operate a business.
As tax time approaches, you might ask, “what do you need for taxes?”
As a self-employed individual, you will have to track many things for your taxes. Here is a guide to help you know what you’ll need for this aspect of your business.
A Record of All Your Income for the Year
There are many different tax documents for self-employed workers, but you should begin preparing for your taxes by calculating your income for the year.
Many self-employed workers operate on a cash-basis system, which means they only include income they received during the year. You can look at your bank statements to see all your deposits unless you use accounting software or have another method for calculating your annual income. You must include all the money you collected throughout the year for earnings.
Receipts for Your Business Expenses
Next, you can explore the self-employed individual deductions that you can use. Everyone who files a tax return can use the deductions the IRS offers. Typically, you either choose the standard deduction or itemized deduction.
Additionally, you must fill out a Schedule C to record your self-employed business expenditures. You can write off every expense you incurred as a business owner, including the following things if applicable:
- Vehicle costs, including gas, repairs, and maintenance
- Home office
- Utilities your business needed and used
- Office supplies
- Legal fees
The expenses you pay during the year help you offset your income. As a result, you’ll owe fewer taxes if you write off every business expense you had for the year.
Total Amounts You Paid for Quarterly Taxes
The next thing you’ll need is the amounts you paid for your quarterly business taxes. Paying quarterly taxes is crucial if you’re self-employed. The taxes you pay throughout the year lower your year-end tax obligations.
If you don’t know how to do taxes, though, you might not know how to pay your quarterly taxes. You might want to consider hiring a tax professional to help you with these tasks.
When hiring a professional, they’ll do the work for you. You can feel confident that they’ll do it right and help you take advantage of every potential tax break. You can reap many benefits by hiring a tax professional.
What Do You Need for Taxes?
After reading this, you might know the answer to this question: “what do you need for taxes?” You need your income and expenses, but you might also need professional help with your business taxes.
If you live in the San Marcos, CA area and need help with your taxes, contact us. At Pacific Tax & Financial Group, we offer tax preparation services and more. We can help you prepare all year for tax time or complete your tax return.