As an independent contractor, you can claim tax benefits specific to self-employment while filing your returns. Organizing records and paying estimated taxes, for example, can help you avoid overwhelming stress or an exorbitant tax liability and penalties. The following guidelines help independent insurance agents understand tax advantages and how to properly prep for tax season.
First, confirm your independent contractor status with the IRS. The IRS defines independent contracting as when a business controls or directs the work results performed by a contract employee, and the employee manages how the results are accomplished. Ensure that your contractor status follows IRS regulations by filing the SS-8 form. Determining your status helps avoid liabilities and tax penalties.
Tax deductions relate to the cost of your work, which is why proof of expenses and thorough bookkeeping is essential. The goal of bookkeeping should be to prepare detailed reports that support your tax return. Use Mint or Quicken for automated and simple bookkeeping, suggests Career Builder. Developing a filing system for categorizing and tracking receipts can save a lot of time. Receipts will back up claimed deductions. Traveling expenses and business-related mileage count, too. Going to the bank to deposit a client’s check or making hotel reservations for work-related traveling can qualify for tax deductions.