Tax Tips for HR Freelancers

With over 40 million taxpayers currently self-employed, self-employment is more common than ever, and that's not just due to changes brought on by COVID-19. From driving for a ride-share company like Uber to starting a new business, self-employment can impact each taxpayer's tax situation differently. 

Jackson Hewitt Tax Service® is reminding all freelancers that it's critical every gig-economy worker, freelancer, contractor, self-employed individual, small business owner, and entrepreneur know what deductions are available to improve their tax situation.

"If you are self-employed in America's rapidly expanding gig economy, there are a lot of options to help you pay less on your taxes," said Mark Steber, Chief Tax Information Officer at Jackson Hewitt. "The US government wants to encourage you to seek a side job or start a business and employ people so there are a lot of deductions you may be able to qualify for if you know about them. I recommend all self-employed taxpayers see a Tax Pro each and every year to determine what deductions may be availabe to get the maximum refund they deserve."

One of the most important benefits for the self-employed is the new Qualified Business Income (QBI) deduction. Self-employed workers and small business owners might qualify for a 20% deduction of eligible business income before taxes. 

In addition to the QBI deduction, Jackson Hewitt is reminding taxpayers about seven more deductions available to gig-economy workers, freelancers, contractors, the self-employed, small business owners, and entrepreneurs. Depending on their profession and whether they qualify for these deductions, these taxpayers may be able to deduct:

• The expenses associated with a home office as well as equipment and supplies. Self-employed workers, as well as those who operate a farm, are the only taxpayers allowed to claim the home office deduction. The IRS describes an office-in-home as an area separated from the living part of the home, when used exclusively for business purposes, such as meeting with clients, maintaining books, or conducting other business-related needs. The area must be part a of your home used solely for conducting business, such as a spare room or study. This means that sitting at your kitchen table drafting emails or walking the dog during a conference call does not qualify as a home office in the eyes of the IRS.

• Maintenance and repairs for vehicle upkeep and expenses, including gas and oil, registration fees, insurance, parking fees and tolls, and depreciation (if  the vehicle is owned), or leasing costs. These may include the fees paid to a cab company for using its cars, or rental fees for a truck driver's trailer. Taxpayers should keep a log of all vehicle expenses (this includes business and personal), miles that were driven for business, and total mileage for the year, to determine the business portion of the expenses.

• Business related travel expenses including transportation, lodging, and incidental expenses such as laundry, phones, maid service, and others.

• State and local government licensing and regulatory fees as well as liability insurance premiums.

• Union and trade association dues as well as subscriptions to trade publications.

• Continuing education for the taxpayer and any employees.

• Self- employed taxpayers can deduct one-half of their self-employment (SE) taxes and all of their qualified health insurance costs directly on Form 1040 Schedule 1 and Form 1040/ 1040-SR.

SOURCE Jackson Hewitt Tax Service Inc.