Whether you count yourself among the estimated 55 million "gig workers" or you are a veteran independent contractor, professional tax preparation protects you from an IRS audits and maximizes your tax return.

Here are some services offered by tax preparation specialist for gig workers and independent contractors.

Playing the Long Game

One of the biggest mistakes tax preparation professionals counsel gig workers and independent contractors to avoid is waiting until tax time think about taxes.

  • LLC: if your gig work or independent contracting becomes your primary source of employment, you can create a limited liability company to run your business through. By creating an LLC, you will be able to add a Schedule C to your 1040, which qualifies you to deduct 20% of your yearly income. This is particularly important if you find yourself on the precipice of a higher tax bracket.
  • Quarterlies: if your tax preparation professional helps you create an LLC, you will need to file quarterly tax payments. These payments must be based on projections of your estimated annual profits. Your tax preparation professional can work directly with your accountant to make this process seamless.
  • Local and State: one thing that often gets independent contractors and gig works in trouble is forgetting to account for both local and state taxes. Because these taxes won't be assessed until the end of the fiscal year, it's easy to forget about them. Your tax preparation professional can include these impending tax liabilities along with your quarterly federal tax estimations.

Deductions and Returns

When it comes to deductions, gig workers and independent contractors must be prudent with what they deduct. These same principles also apply to maximizing returns.

  • Direct connection: deductions for gig workers and independent contractors must be directly connected to the work they perform. This includes home office equipment, travel, advertising, marketing, and professional licenses. Your tax preparation professional will help vet your deductions to prevent any IRS red flags.
  • Proof: when it comes to maximizing returns, having hard proof of your expenditures, profits, and losses will allow your tax preparation professional to file a maximum return on your behalf. This means keeping every receipt, invoice, and check connected to your LLC. Once you're able to turn this data over to your tax preparation professional, they can create a 1040 and Schedule C that accurately reflect your tax liabilities. You can also give yourself an extra boost by slightly overestimating your tax burden each quarter.

For those in Belgrade MT, there are a variety of tax management solutions available.

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