Tax Tips for the Self-Employed Nurse

Note:  the following entry is the third of three guest posts from our partners at Painless1099.  Cerebro presents Painless1099 as one of many resources available to nurses who work as independent contractors on the Cerebro marketplace. 

Being self-employed is hard, plain and simple. Finding clients, managing expectations, keeping track of time and appointments, and then actually getting work done is a handful. And, of course, when tax season rolls around you have to deal with the hassle of getting 1099 taxes filed. Sorting through receipts and praying you don’t get blindsided by a bigger bill than you expected is fun, right? Not! Tax season should be just as easy for someone who’s self-employed as it is for people with a W-2 job, which is why we put together this short list of things to help avoid a tax nightmare.

1) Stay on top of your quarterly payments.

One of the messiest parts of self-employment is not having an employer automatically withholding Social Security and Medicare taxes for you. On top of that, the IRS requires you to make estimated quarterly payments for these taxes, which means you’ll need to play accordingly. If you owe over $1,000 and don’t make these payments, you could be charged penalties. The best part about paying quarterlies is getting Uncle Sam’s cash out of your bank account so you’re not tempted to spend it because there’s nothing worse than having to stroke a check on tax day that you don’t have the money for. Make sure you mark your calendar for the quarterly estimate filing dates – which can be found here.

2) You can always file an extension if you’re behind.

If you’re feeling behind the 8 Ball even with a few extra days, make sure to file an extension for your personal taxes (super easy to do through most tax software). You can also head to the IRS Free File page for a run-down of options to file your extension for free. Remember, as of 1/1/16, the IRS has the power to revoke or deny your passport in certain cases of unpaid taxes, so use the extra few days to take a look while you still have time!

3) Keep track of your expenses.

If you’re self-employed, you have ample opportunities to take tax deductions. Anything including your home office, mileage driving, meetings, coffees with clients, and the water bottles you keep stocked in your Uber can be written off if you’re prudent about keeping records of these expenditures. Fortunately there are some great options out there for tracking expenses. Check out QuickBooks Self-Employed or Xero Tax Touch for a great way to categorize expenditures for clients. MileIQ can help you log mileage and 99Deductions can help you understand what you can expense. While you’re at it, take a look at Hurdlr, a holistic finance app for freelancers built by 99Deductions. With so much awesome technology at our fingertips, there’s no reason to get behind on expenses over the year! This will make all the difference in driving down your total end of the year tax obligation.

4) Find a great accountant.

Finding a good accountant will pay off in the long run, literally. Knowing what you can write off as a business expense makes all the difference when it comes to driving down your overall tax bill. Working with the right accountant or software will make sure that you aren’t overpaying at the end of the year. For instance, CPAforFreelancers is a phenomenal resource for anybody who is self-employed (not just for freelancers as the name might suggest). You can hire them to take care of actually filing your taxes for you. Brass Taxes is another great site for all of your tax needs. They even have a price estimator on the homepage to help you calculate if working with them fits your budget. If you’re a little more tech inclined, check out BotKeeper, an “AI” bookkeeper for your small business.

5) Make sure to save 30% for taxes.

Saving is hard — no surprise here. Even if you’re meticulous about your expenses, you’re still expected to pay quarterly estimated taxes on roughly 30% of your self-employment income, which means you need to be keeping an eye on not only how much you earn, but how much you set aside for Uncle Sam. The good news is we’ve created a solution so that you can focus on your work and we can save your money for you. Painless1099 is a smart bank account that automates tax withholding from each payment of 1099 income you receive. With a Painless1099 account, all you have to do is connect your direct deposit or invoicing tool (like Quickbooks Invoicing, Freshbooks, or Harvest) to your new smart savings account and input a few tidbits of information about your tax status.

You need to make sure that you’re at least setting aside 30% of your income. Your actual effective tax rate will generally be a little lower than this, but if you’re not saving at least 30% or keep an active eye on what your effective tax rate is, you’ll likely end up perusing through couch cushions to get the cash you need to cover your bill.

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