No one likes paying taxes. For the self-employed and business owners, you have the added stress of keeping track of your own taxes because you have nothing withheld.
In 2018, the average tax payment in the US was $15,322. But, if you have to file a 1099 tax return, you may not be 100% what you owe.
These are five of the biggest mistakes when you are filing your tax return.
1. Accounting and Routing Numbers
Let’s face it, these numbers can be a pain to keep track of. But, if you do not make sure your accounting and routing numbers are correct when filling out a 1099 form, you may see a significant delay in receiving a possible refund.
When you are filling out a form, just make sure that these numbers are correct and triple-check it if you have to. Otherwise, you may drive yourself crazy trying to figure out why a refund has not come yet.
2. Quarterly Payments
One thing about being self-employed that not everybody figures out right away is that you have to send quarterly tax payments throughout the year. Admittedly, you may get a break if it is your first year filing 1099.
However, the general rule is that you are supposed to send payments four times a year if you suspect that you will owe $1,000 or more in taxes.
There is more info here for other things you may outright forget or not know to send in during tax season.
3. Business Expenses
This is a big one, because new people to 1099 may not know the appropriate amount to write off if anything.
For example, let’s say you are working in your home throughout the year. Some people may not know that you can write off a portion of your utility expenses in your home if you are using it for work.
However, others may go the other direction and write off the entire expense when they can only write off the percentage of space that they use for work.
4. Personal Expenses
This ties into business expenses because people may think they can claim it as a business expense. For example, your cellphone and internet expenses cannot be entirely covered here, because those have personal use alongside business in a lot of cases.
You need to sit down and actually do the math for how much time you use your cellphone or your internet connection for work vs. personal pleasure.
5. No Records
Finally, some self-employed or small business people may not even bother to have a book for all of their income and expenses. This is a mistake, especially if you actually did end up getting audited because then you would have nothing to show the IRS.
You need to keep track of your income, how you got it, when you got it, and your business expenses as well, for that matter; that way you could justify what you are negating if you ever got audited.
Fill Your 1099 Tax Return Form Right
These are just five of the mistakes that people make on their 1099 tax return. Have you made any of those mistakes, and are you concerned you may have made a similar mistake?
Read our Business section for more information.