Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
Let’s get something straight. The fact that you are getting a 1099-MISC to report your earnings to the IRS means you are in business for yourself. You need to take full responsibility and treat your business as a business—and do the normal things a business does when filing taxes.
Here are a few ways you can start acting like a business and mitigate issues with the IRS.
1. Stop giving out your Social Security number and get an Employer ID (EIN) number. This accomplishes two things: It protects you from identity theft, and it shows the IRS that you are a business.
2. Open a business bank account, using your new EIN, to separate your personal finances from your business finances. If you ever get audited, this step will make it easier to prove your business expenses to the IRS.
3. Keep books. If you don’t know how to keep your books, it’s time to either learn or hire a competent bookkeeper. Being able to read and understand your business’s financial statements will help you cut costs, get loans, understand when to raise prices, and help you with tax planning.
4. Select accounting software that’s appropriate for your business—don’t just use something that doesn’t really meet your needs just because it’s free. These days, there are sophisticated choices that can not only track your bookkeeping needs but also help you create a business website. Many types of software will track your inventory and sales; keep track of billing; keep records of your sales taxes by state; place your products into online sales forums; and give you access to your records from anywhere.
5. Do some tax planning. Read a book on small business taxes (like mine, Small Business Taxes Made Easy, or another one of your choosing) to learn how about tax benefits available to business owners of all kinds. There are lots of ways to get tax benefits for your family’s medical expenses, retirement plans, childcare, and more, but you can’t get them if you don’t know about them.
6. Pay your estimated taxes. After you have the numbers and know what they mean, and once you have reduced your profits by taking advantage of tax planning, you can determine your quarterly profits.
Remember: Even if your overall taxable income is a loss, you may owe taxes because your Schedule C had a profit. You’ll be paying 15.3 percent as self-employment taxes (Social Security and Medicare) on those profits.
These are easy steps to take. If you use this as a checklist, you’ll cut your taxes, reduce your audit risk, and increase your profits. All good things for the independent contractor!
Eva Rosenberg, EA is the publisher of TaxMama.com, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.