As a gig economy participant, tax time is going to be a pretty important, if not downright stressful time every year. The rules might change, and the detail and balance required to stay in the good graces of the federal government can be pretty tricky to maneuver, for sure.
However, it does not have to be a stressful thing to get your taxes in good order. In 2020, you should definitely be thinking about them now, by the beginning of March for sure, so you are well prepared when the actual time comes.
Here are a couple simple things to think about for tax prep in 2020. Assumptions here, include that you will likely be doing most of the work on your own, not assisted by a professional.
- Gather receipts – You will want to ensure an easy accounting of your bookkeeping, so collect all relevant receipts and statements. This might include any entertainment, travel, or other business-related expenses you incurred during 2019.
- Collect year-end statements – As you gather receipts, you can also collect year-end statements from credit cards and bank accounts, as well as any other payment system or portal used (like PayPal). All of them will have a means to develop and save a list of all yearly activity – -these are important documents for account reconciliation.
- Collect mailed tax statements – You should be receiving certain tax documents in the mail already – things like 1099 statements from clients you served, and any w2 forms you might get from an employer. If you own property, there might be additional statements coming from the bank regarding the interest you paid, and you might have healthcare related statements too.
- Check your dates – While most businesses and individuals will file on April 15, 2020, some types of business (like S corps and partnerships) file earlier – March 16, 2020. If you aren’t sure when you are supposed to file, check with a tax professional.
Do You Need to Push?
It is very common for many businesses and/or individuals to request an extension to file at a later date. Personally, I have done it for the last couple years, simply to have a little more time to get things right.
There are at least a couple plain benefits to filing for an extension:
- It’s free to do so, and does not incur penalties
- You can have up to six more months to complete your return
- The form to complete is easy, and is automatically accepted
If you need to get an extension for the March 16, 2020 deadline for filing a return, you’d want to submit a form 7004 (linked here: https://www.irs.gov/pub/irs-pdf/f7004.pdf). As mentioned, this form will be automatically accepted, so you’ll get the extension.
Important to note though, is you are still responsible for the taxes due: you’ll need to estimate them and perhaps even pay them on time.
For more on IRS extensions and how to handle your responsibilities, go right to the source here: https://www.irs.gov/forms-pubs/extension-of-time-to-file-your-tax-return.
Though tax time might feel a little bit intimidating, it is nothing to be frightened about. Be a grown-up and don’t hesitate to ask for help when you need it. It is important to correctly file your taxes annually. Luckily, it does seem to get a little easier every year to be able to complete them on your own or with some free (or low cost) help online…be sure to get help when you need it. Watch your deadlines and always pay your taxes as early as possible to avoid potential late fees and penalties.