Let’s face it, taxes can be complex, especially if you are a freelancer or you have a side-gig, and even more so after the many recent rule changes and the tax effects of small-business relief programs.
However, there are a few tax-saving opportunities which we think are worth considering this tax year.
Paycheck Protection Program (PPP)
Did you know that if your business received a loan through the PPP, and you qualified for forgiveness, the IRS won’t generally consider this as part of your gross income?
It’s also possible to deduct the business expenses that you paid with the loan money on your federal tax return.
Having said this, tax rules on PPP do differ from state to state, so ensure you consult with an advisor.
If you work for yourself, there are tax breaks available for retirement savings. Solo 401(k) (also known as one-participant 401(k)s) is an example of an IRS-approved retirement account for a self-employed person. Advantages include being able to put money away pre-tax.
Simplified Employee Pension IRAs, which are used by small businesses and self-employed individuals to meet their retirement savings needs, are an alternative option, also giving you more time to contribute if you have been given a tax extension.
For self-employed people, you can get a tax deduction for every mile you drive for business purposes.
In 2021 the tax deduction was 56 cents per mile, and in 2022 this has risen to 58.5 cents per mile.
The important thing to remember is to keep a log, because the IRS may ask you to prove your mileage claim.
The business meals deduction is up from 50% to 100% for 2021 and 2022, if the food and drinks are from a restaurant, and this includes takeout and delivery.
If you’re working from home, it’s well worth looking closely at your rent or mortgage, utilities and other house-related expenses as a way to get a tax break. You could also consider the equipment you use, which if you haven’t already claimed it as a business expense, could be deducted at market value. As ever, make sure you keep your receipts for your records to prove the original purchase.
New for 2022
If you are self-employed and you have clients who pay you at least $600 a year, you will be familiar with Form 1099-NEC.
New for 2022, when your clients use a payment processor platform such as Venmo or PayPal to send money, or if they pay by credit card, you will receive Form 1099-K.
It’s really important to a) ensure you are organized to keep both of these forms and b) that you don’t double-report the income!
How we can help
If you need help or advice with your finances, contact us today . TaxAssist offers an expert professional advisory service. Call us on 888 547 9295 or inquire online here to book your free, no obligation consultation.
Date published May 5, 2022 | Last updated Jul 22, 2022This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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