self employment and taxes - what do you do?

Posted on: 28 February 2017

If you make your living as a blogger, here are three things that you need to make sure that you include when you file your taxes. This information can help lower your tax liability and your tax bill.

#1 Health Insurance Costs

Many independent contractors are not aware that they can actually deduct their health insurance costs. As an independent contractor, you can deduct the entire cost of your premium that you pay for health insurance for yourself and your family. This deduction will come off your overall income and help lower it down a bit, reducing your tax liability.

This is different than the deduction that you can take if you spent more than a certain percentage of your income on health bills. This is a special deduction designed specifically for individuals who work for themselves and pay for their own insurance coverage.

#2 Blog Expenses

Next, make sure that you kept track of all the expenses that you accumulated while running your blog. All of these expenses can be deducted from the money that you made from your blog, leaving you with your overall profit for the year that you will be taxed on.

For example, if you paid for hosting for your blog, if you purchased special software programs to help you run your blog, if you use a special application that included a service fee, or if you hired other independent contractors to work on parts of your blog, this is another expense that you can deduct from your overall income to find out what your profits really were.

It helps if you keep a running record of your expenses throughout the year. However, even if you didn't do that, you can still work to gather this information now. You are going to want to get your receipts together and go back over your business account to figure out all of your expenses for your business. Then, set yourself up with a system for keeping track of expenses for this year so you don't have to go through this process next year again with your taxes.

#3 Home Office Expenses

Finally, if you work from home, make sure that you take a home office deduction. Many articles recommend shying away from a home office deduction because it increases your chances of an audit. However, if you have a legitimate reason for taking a home office deduction and you create documents that support the use of your home as an office and keep records of your bills, you'll be okay.

Even if you don't want to go back through all of your bills for your house and figure out what percentage of each bill can be applied toward your home office deduction, you can still take advantage of this deduction. There is a general deduction that is available to you based on the square footage of your home that is dedicated solely to office space. This general deduction can help keep your tax paperwork a little simpler. 

To learn more, contact a small business accounting firm.