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How To Claim Tax Write-Offs with FlyFin?
What is a tax write off?
Stressing about paying your self-employment taxes this year? Tax write-offs may be the golden ticket you’ve been waiting for. So, what is a tax write off? The IRS allows every American taxpayer the option to claim some of their business expenses as tax deductible and as a result, lower their taxable income.
In addition to the standard deduction that you can use for claiming personal expenses (the amount of which will depend on your filing status), if you're self-employed you can also write off certain business expenses and bring your tax bill down even further.
If you’re a full-time employee at a company but also do some freelance work on the side, you can deduct any business-related expenses you might have incurred throughout the calendar year to bring down your taxable income.
Key takeaways:
- Tax write offs are business-related expenses you can claim as tax-deductible.
- Business expense deductions are different from a standard deduction, which is for personal expenses
- You can claim both deductions every tax season
How do tax write-offs work?
Tax write-offs are any expense that the IRS sees as “ordinary, necessary, and reasonable.” This means that the expense you are claiming as a deduction has to be a common expense in your industry and something that helps you make money.
Tax write-offs are also known as tax deductions, and they reduce your taxable income. This is different from tax credits, which are also available to every taxpayer, but reduce the amount of tax that you owe, rather than the amount of income that you must pay tax on.
If you sell personalized sweatshirts on Etsy and buy some fancy thread to make your embroidered designs look better, you can write off that cost as tax deductible because it is essential to your business generating income.
But how do you know which expenses you can write off? That’s where FlyFin comes in. Just link your expenses, and our A.I. tax engine takes care of the rest, automatically finding every possible deduction that you can write off your taxes, saving you both time and money. And our CPAs who are experts in 1099 taxes are available 24/7 to answer any tax question you have. Then at tax time, they prepare and file your federal and state tax returns.
Any work you perform as a freelancer, gig worker, independent contractor or self-employed individual, will get you a 1099-NEC form from each entity that pays you. 1099-NECs report the income that you earned to the IRS, and you should receive a copy of each one, which you can use to calculate your gross income on Form 1040.
To figure out your net income, which is the income you’ll actually be taxed on, you need to first enter all your business expense deductions. And where do you record these write-offs? They go on a form called Schedule C. You will attach this to your Form 1040, which is the standard form that every taxpayer uses.
Remember that every self-employed individual also has to pay estimated quarterly taxes to the IRS if they think they’ll owe more than $1,000 in tax for the year. You should calculate this amount on Form 1040-ES. Failure to pay this can get you in trouble, and you could be hit with some steep penalty fees. A quarterly tax payment calculator can help you figure out your tax liability.
What are itemized deductions?
As a self-employed person, you have to pay self-employment tax, also known as FICA (Federal Insurance Contributions Act) tax, which is 15.3% of your net income. This includes the tax amount for both Social Security tax (12.9%) and Medicare tax (2.4%), and you can calculate exactly how much you owe the IRS with this self-employed tax calculator.
To help small businesses be successful, the IRS allows certain business expenses to be written off from taxes. These itemized tax deductions can help lower your taxable income, but you’ll need to keep a pretty thorough record of all your expenses throughout the year to make the most of them.
There are hundreds of available deductions to choose from, you just have to make sure that you’re following the exact IRS guidelines when claiming that expense, otherwise you will risk getting audited.
Let’s say you work from home as a social media manager. If you have an area in your house that you use as a home office, you can deduct the business expenses associated with it as a tax write off. But you can only do this if you use that area exclusively as a workspace.
Regardless of whether it’s a separate room or just a desk in the corner of your living room, you cannot do anything that is not “work-related” in that space. If you eat, socialize, or entertain in that space, you cannot write it off.
If you’re still not sure what you can write off, use this 1099 tax calculator and find out exactly what counts as tax-deductible in your line of work.
As you can see, there are certain benefits to being self-employed. Writing off business expenses is an easy way to reduce your tax bill, as long as you are prepared to keep track of your expenses throughout the year.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology.
Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes.
In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
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