As the gig economy takes off, independent contractors are becoming more and more common. While many 1099 workers in the past more closely fit the definition of business owners, modern 1099 workers often straddle the line between contractor and employee. As a result, your tax obligations as a contract worker may seem deceptively straightforward.
Unfortunately, you may be missing out on a variety of tax benefits by handling your taxes yourself. Even if you don't think your finances are complicated enough to require professional help, these three benefits of working with a tax preparer may convince you otherwise.
1. Deduction Calculations
You may not view yourself as a business owner, but that's precisely how the IRS sees you. Since you own and operate your own business, you can potentially claim many of your expenses for business use. These deductions can help reduce your tax liability by impacting your overall profit/loss statement for the year, even if you are your only employee and take your wages as a pass-through.
Although you can handle this yourself by using some standard values or making your own estimates, a professional tax service can help you to maximize your deductions. More crucially, they can ensure your deductions are legally allowed, helping you to avoid potential future tax complications.
2. Time Savings
If you work as an independent contractor, then you know all too well that time is money. Consider the amount of time you spend filing your taxes each year and how you can better utilize that time for other purposes. Even if you don't intend to spend your time savings earning additional income, you can use the freedom from preparing your taxes yourself to take some much-needed time off.
The time savings of working with a tax preparer can be especially valuable if you typically find it challenging to work through your tax paperwork. Allowing a professional to handle this time-consuming task means less stress and one more item you can check off your to-do list.
3. Retirement Help
Investing in retirement can be slightly more complex for the self-employed since you can't rely on employer-sponsored plans to do the heavy lifting for you. The tax implications of investment vehicles such as Simplified Employee Pensions (SEPs) might seem arcane, but these products can allow you to save money while also reducing your tax burden.
A professional tax service can help you navigate these challenging waters so you can continue to contribute to your future without creating an additional hassle for yourself at tax time.