COLUMBIA, Mo. (KMIZ)
For anyone self-employed or making a living from a service like Door Dash, filing your earnings can be a little tricky so what do you do?
Tax expert Samantha Dent tells you what steps you can take under some of those special circumstances.
For someone who maybe works with Door Dash or started a small business during the pandemic, it can be a challenge since you do not get a W-2. So how should someone track his or her expenses?
There’s lots of ways to track your expenses. And really, the IRS isn't picky about that, you just need to come up with a method like maybe a spreadsheet, but the biggest thing is just you know, trying to set aside things that are related to the business versus personal, you know, even setting up a separate bank account is ideal, you know, doing DoorDash one of your biggest expenses is mileage, you know, any of those expenses that you that you incur to to, you know, set up for the business, then those are going to be deductible.
What taxes there are and how much do you pay as someone who is self-employed?
So a self-employed person is going to pay income tax, just like anyone that you know, earns a W-2. So there's federal and state. And then on top of that, you're going to pay self-employment tax. And what self-employment tax is, is that Social Security and Medicare that we all pay through a W-2 for the employer pays half, and then we pay half self-employment taxes, actually, both sides of that, so it's about 15%. You are going to pay that on whatever profit you make at the end of the year, on any self-employed income. Sot there is more than one reason to track those expenses. And certainly, self-employment tax is one of those you'd want to save on.
If there are any challenges specifically for people that are self-employed?
Certainly, I think there's a couple of challenges. One of those probably main challenges is trying to prove your income if you're going to buy a house, if you want to go buy a car, you know what some of the lend you money. Normally, they are going to say let me see your pay stub. And when you're not, you know, on payroll necessarily, because you're self-employed, then there's got to be some way to prove that and so being self-employed, you have to be diligent about knowing what you're making and spending so that you can prove that to someone you know, there's some good and bad to being self-employed. However, one of those things might be to go ahead and claim all your income and, you know, maybe not drive down that profit so much because if you want to be able to have someone lend you some money, you might need to show that you made some money.
The last day to file your taxes is April 18.