1. Do I need to pay quarterly estimated taxes? How much and when?
It would be helpful to pay estimated taxes. Here are the due dates for quarterly estimated tax payments for a calendar year taxpayer:
- 1st quarter (January 1 to March 31): Due April 15
- 2nd quarter (April 1 to May 31): Due June 15
- 3rd quarter (June 1 to August 31): Due September 15
- 4th quarter (September 1 to December 31): Due January 15 of the following year
For the most up-to-date and detailed information, always refer to the IRS website:
2. What should I be tracking for deductions?
Some common expenses to track (not an exhaustive list):
- advertising costs
- commissions
- supplies
- legal fees
- repairs and maintenance
- office expenses
- auto expenese
- depreciation
- travel & meals
- business use of your home
Key to Tracking Expenses:
- Keep Excellent Records: This is paramount. Keep receipts, invoices, bank statements, and mileage logs for all business expenses. Digital records are highly recommended.
- Separate Finances: Maintain separate bank accounts and credit cards for your business and personal finances. This simplifies tracking and makes an audit much easier.
- Use Accounting Software: Tools like QuickBooks Self-Employed, FreshBooks, or even a simple spreadsheet can help you categorize and track your expenses throughout the year. TurboTax integrates with many of these.
By diligently tracking these common expenses, you can significantly reduce your taxable income and save money on your self-employment taxes.
Helpful links:
Reporting Self-Employment Business Income and Deductions
3. Should I open a separate bank account for my side gig?
It is definitely a good idea to have a separate bank account for your side gig. It makes tracking income and expenses easier.
4. Would forming an LLC help me save on taxes?
We are not able to offer legal advise to decide whether or not you should form an LLC. Below are some resources to help you make that determination.
How Do LLC Taxes Work?
Limited Liability Company Taxes
Choosing Your Business Structure: 5 Types of Businesses to Consider
Filing Business Taxes for an LLC for the First Time
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