Being Freelancer, Finances and Taxes, Freelancers, Marketing Yourself, On Your Own, Self-Employed, The American Dream

Splitting The Most Common Business & Personal Expenses

Splitting even the most common business & personal expenses takes time. So, if you’re part of the on-demand society, you’ll have to carefully calculate your business expenses when tax season is just around the corner. You’ll write these off on your Schedule C and it’s crucial that you do it correctly. As an independent contractor, properly calculating your business expenses can greatly reduce your tax liability and save you money.


The difficult part is actually calculating these expenses. When you’re self-employed, many of your business expenses are mixed in with personal expenses so it takes some work on your part to figure out only the business portion. In this guide, we’ll take a look at the three most common business and personal expenses.

Keep in mind – when deciding between business and personal expenses, the IRS requires that business expenses be ‘ordinary and necessary’. Use your judgement when making this decision.

Cell Phones

If you use your cell phone for work purposes, you most likely use it for personal reasons as well. With cell phones, you have a little more room for judgement when deciding on how much is used for business. Typically, you have to calculate how much of your cell phone bill is used for business, including voice and data.

For example, if you make a lot of calls for business purposes and you have to switch your plan for one with more minutes, you can probably write-off the difference between the two plans.

Cars

A car is another common expense that freelancers use for both personal and business reasons. There are two ways to calculate this business expense:

  • Standard mileage rate: The standard mileage rate is the easiest way to calculate your car’s business expense. To use this method, you would calculate your business mileage by the IRS approved rate. The rate for 2015 was 57.5 cents. This rate includes gas, maintenance, lease payments, and insurance.
  • Actual costs method: Alternatively, you can use the actual costs method. In this method, you need to calculate the actual costs of your car expenses for business use. This method is a bit more complicated compared to the standard mileage rate. If you choose to use this method, make sure you keep careful records of all your car expenses.
  • Home Office: If you’re part of the on-demand economy, chances are you work from home at least part of the time and have a home office. You can write-off a portion of this expense. To the IRS, your home office is anywhere in your home your primarily meet with clients, do work, or store business inventory. Using the home office simplified method, you can multiply the square footage of your home office by the IRS approved rate, which is around $5 per square foot. The maximum allowed square footage is 300 square feet.

Calculating your business expenses can be overwhelming but it’s important that you do it carefully and correctly. In the event of an audit, you want to be able to back up why you wrote off the amount you did.

1099, Being Freelancer, Finances and Taxes, Freelancers, On Your Own, Self-Employed, Services, Taxes

3 Tips For Finding Tax Preparation Services

For an average taxpayer, completing taxes every season can be quite a challenge. If you’re part of the on-demand economy, you may also have added concerns, including more forms to file and many different streams of income to keep track of. Taxes for freelancers and independent contractors can be more complicated, especially if this is the first year that you are self-employed. It’s always a good idea to seek tax preparation services when doing your taxes. However, not everyone can afford it. If you are looking for tax services, there are many programs available at discounted prices to help low-income taxpayers. 3 Tips For Finding Tax Preparation Services:

Volunteer Income Tax Assistance

The Volunteer Income Tax Assistance or VITA is a tax preparation service provided by IRS certified professional volunteers. Their services are offered free of charge to those who earn less than $53,000 a year or are disabled, elderly, or not a native English speaker. They offer basic tax services, such as tax preparation and filing. They do not, however, help with Schedule C preparation, which means this service may not be for those in the on-demand society looking for help with self-employed taxes. Volunteers are usually found in local community centers and libraries. To find one near you, click here.

Myfreetaxes.com

Myfreetaxes.com is a free online tax preparation software for households earning $60,000 or less. This software will help you with tax preparation and filing for both your federal and state taxes. They can also help with 1099 taxes. Their software is provided by H&R Block, while the services are funded by Goodwill, the Walmart Foundation, and the United Way.

Additional Resources

Additionally, Myfreetaxes.com offers a tax help hotline, which you can reach by dialing 1-800-MY-TX-HELP. The IRS also has resources for help with your taxes on their website, which you can look into here.

If you are looking for help with issues after you have filed your taxes, you can reach out to the TaxPayers Advocate or Low Income Taxpayer Clinics. This is an independent group within the IRS that can assist with audits, collections issues, and appeals.

Lastly, you may also be able to find local resources within your community to help with your taxes.

1099, Being Freelancer, Freelancers, Future of Work, On Your Own, Self-Employed, Uber

The Five Faces of the On-Demand Economy

Originally published at Smallbizlabs.com

Last week Intuit released The Five Faces of the On-Demand Economy, which covers 5 common profiles of on-demand workers.

This is a follow on report to their On-Demand Workforce report from several weeks ago, which covers the motivations, attitudes and demographics of those working via on-demand economy (ODE) work intermediation platforms such as Uber, Upwork, Fiverr, etc.

The Five Faces and their percentage share of all on-demand economy workers are:

  • The Business Builders – Primarily driven by the desire to be their own boss, they represent 22 percent of on-demand workers.
  • The Career Freelancers – Happily building a career through independent work; 20 percent.
  • The Side Giggers – Seeking financial stability by supplementing existing income; 26 percent.
  • The Passionistas – Looking for the flexibility to do something they love; 14 percent.
  • The Substituters – Replacing a traditional job that is no longer available; 18 percent.

These profiles were developed using cluster analysis to group ODE workers who share similar motivations and attitudes.

As Intuit VP Alex Chriss points out in his article The Future of Work Doesn’t Look Like You Think it Does, these groups are not fixed. Key quote:

The data shows five different faces. But in meeting hundreds of our customers I have come to appreciate that these profiles are fluid and there are often several motivations that influence people’s decisions on how to own their own career.

This is an excellent point. These “faces” – much like the pirate’s code – should be seen “more as guideline than actual rules“.

The reason these faces are important is they show how differently ODE workers view ODE work.

Satisfaction is a good example. As the chart below shows, most Substituters are not sastified with ODE work while the vast majority of Business Builders and Career Freelancers are.

See the report for more differences and details by segment.

Emergent Research worked with Intuit on this study.

Tax refund
Being Freelancer, Finances and Taxes, On Your Own, Taxes

How to get a Tax Refund

Tax day will soon come and go. Especially for Freelancers and Independent contractors who might be hit with unexpected taxes to pay. Aside from the relief of being done with taxes until next year, one thing many have to look forward to is a tax refund. With the average size of a tax refund at nearly $3,000, it’s not a small amount of money. This is especially true for small business owners. So, wouldn’t it be helpful to learn about how to get a tax refund.

A tax refund can be the biggest payday of the year for a small business. Before we talk about what to do with it, let’s get a few basic questions you might have out of the way:

How Much You Will Get

After preparing your tax return, you will find out if you will get a tax refund and how much. Depending on the form you filed, you can find your refund amount on these lines:

  • Line 76A for Form 1040
  • Line 48A for Form 1040A
  • Line 13A for Form 1040EZ

There are also many tools online that can give you an estimate of how much you will receive. Check out one here.

When You Will Get It

The time it takes for you to receive your tax refund will depend on how you file and when you filed. If you filed via paper, you can expect to wait anywhere from 4 week to 6 weeks. If you filed electronically, your wait is much shorter, anywhere from 24 hours to 3 weeks.

Also, if you filed closer to the deadline, you may have to wait longer as the IRS has a larger batch of returns to process.

Next, comes the big question: when you get your tax return, what do you do with it? It’s important to spend it wisely. If you’re expecting a tax refund this season, here are ways you can spend it:

Add to your emergency fund

Unexpected costs can really sidetrack your business, making it difficult for you to get back on your feet. That’s why it’s crucial for any small business to have an emergency fund. It’s important to be prepared for emergencies or just those rainy days when business isn’t great. Aim to have 3 months of expenses on hand.

Invest your refund

As a small business owner, investing in your retirement might not be a priority. But if you don’t have a retirement fund already set up, consider investing your tax refund in one, such as a Roth IRA. You can choose from a traditional IRA, in which you avoid taxes when you put money in, or a Roth IRA, in which you avoid taxes when you withdraw money in retirement.

Pay off debt

If you or your business still has debt, it’s a great idea to use your tax refund to pay if off. The longer you have debt, the more interest you are accumulating. Start with your highest interest debt first and work your way down the list.

Think outside the box

If you’ve already done all of the above and want to spend your refund more creatively, think outside the box. You may want to invest in new technology to take your business to the next level. Or perhaps there is a course for you or your employees to help better your skills. These are just a couple examples of ways you can invest now in the future of your company.
If you find that your refund is taking longer than expected, don’t panic yet. You should wait at least 3 weeks if you filed electronically or 6 weeks if you filed by paper before contacting the IRS. You can check the status of your refund here. The earlier you file the better as you will see your refund faster.

Freelancers, Insurance, On Your Own, Uber

Insurance Options for On-Demand Drivers

Ridesharing is a phenomenon that is popping up in new cities every day. And to keep up with the demand, more and more workers are signing up to be drivers for on-demand car sharing and delivery companies such as Uber, Lyft and InstantCart. You can’t be work for one of these companies, however, unless you know your insurance options.

Independent contractors for such companies can make a considerable amount of income, even supplementing full time salaries. However, one of the primary concerns is insurance. Drivers use personal cars and are not considered employees of the companies. Therefore, the protection and liability coverage can be a bit confusing. If you’re are a on-demand driver or considering becoming one, read this guide first and understand what you are and are not protected against:

Is insurance provided by the company and if so, what kind?

In short, the answer to this question is yes. But it does get complicated. Drivers are protected in some ways if using their car for the purposes of transporting clients but the amount and level of insurance depends on what they are doing. The categories or stages typically consist of:

  • Logged into the app and waiting for pick-up requests
  • On way to picking up a passenger/client
  • Transporting a passenger/client to destination

The major ridesharing companies offer some level of protection in each of these stages but they vary. Let’s take a closer look by company:

  • UberX:
    • Logged into the app and waiting for pick-up requests: Contingent liability coverage (50/100/25 limits); covers losses not covered by driver’s personal policy
    • On way to picking up a passenger/client AND/OR transporting a passenger/client to destination:
      • Commercial Liability insurance ($1 million limit)
      • Uninsured bodily injury ($1 million limit)
      • Contingent comprehensive and collision coverage ($1000 deductible)
      • Minimum amount of personal injury protection coverage (if required by law)
  • Lyft:
    • Logged into the app and waiting for pick-up requests: Contingent liability coverage (50/100/25 limits); covers losses not covered by driver’s personal policy
    • On way to picking up a passenger/client AND/OR transporting a passenger/client to destination:
      • Commercial liability insurance ($1 million limit)
      • Uninsured bodily injury ($1 million limit)
      • Contingent comprehensive and collision coverage ($50,000 limit and $2,500 deductible).
  • Sidecar:
    • Logged into the app and waiting for pick-up requests: Collision insurance ($50,000 limit and $500 deductible); covers losses not covered by driver’s personal policy. Note: Policy may differ in California, Washington State, and Chicago
    • On way to picking up a passenger/client AND/OR transporting a passenger/client to destination:
      • Commercial liability insurance ($1 million limit)
      • Collision insurance ($50,000 limit and $500 deductible)
      • Policy may vary in Washington state and Chicago

Keep in mind that when your car is used for personal driving, there is no insurance provided under all companies.

What insurance should I purchase myself?

As a driver, you should have auto insurance whether or not you are using it for business. Some ridesharing companies say that a personal insurance policy along with their supplementary coverage is enough coverage. However, this area is still very gray, particularly when you are using your car for business. Consider these policies:

  • Commercial car insurance: Many states require ridesharing drivers to purchase commercial car insurance so it’s important to understand the rules and regulations of your state. This insurance is typically required for taxis and many states consider rideshares to be under the same category. You do need a commercial driver’s license to purchase commercial car insurance.
  • Policies targeted toward ridesharing drivers: With the rise in on-demand ridesharing, many insurance companies are now experimenting with policies specially geared toward these drivers. Ask your insurance company about their policies.

What else do I need to know to stay protected?

If you are a driver for a ridesharing company, it’s important to understand your rights and how your are protected. Drivers are considered independent contractors, not employees, and so protection is typically limited. Depending on your budget, purchase an insurance policy that can cover you as much as policy. Rules and regulations for ridesharing companies and drivers are constantly shifting. It’s important to stay up to date to keep your protected in any situation.

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