Top Income Tax-Deduction Tips for Creators, Social Influencers and Gig Workers The workforce is more diversified than ever, so let's shine a light on the spectrum of allowable deductions.
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The start of every new year inevitably means that tax filings are around the corner. For any accountant and bookkeeper, Q1 is their busiest time of the year because tax season is in high gear. If you're self-employed, you're probably starting to receive those 1099s from your various side hustles, projects and gigs.
According to a survey, 33% of Americans procrastinate in doing their taxes and wait until the last minute. It also found that millennials are the most likely to procrastinate on filing their taxes compared to other generations. Who can blame them? It's a lot of work and generates stress and anxiety for most people.
The IRS notes that self-employed people spend an average of 24 hours preparing their taxes. Aside from the time-suck and the anxiety that tax-prep creates, it's also rife with accounting and tax-filing uncertainties, as well as the onus of knowing what deductions qualify and meeting deadlines to avoid penalties. From our internal studies, 18% of freelancers pay fines for not paying quarterly tax returns.
Related: The 3 Best Ways to Save on Taxes When You Have Multiple Business Ventures
There are many unknowns and pain points around tax preparation for self-employed, creators and freelancers. Thankfully, the IRS offers a brief, online series of questions that helps people determine whether they are operating a profit-based business or their side-gig is more of a hobby. It's a crucial distinction to understand and button-down and will help determine what type of tax forms will need to be used. Even then, there are still a lot of complexities involved around deductions.
Is it tax-deductible?
A basic rule of thumb is that if the expense was essential to run the business, then the chances are pretty high that it is a business expense. However, let's say you use your automobile for personal and business purposes. It would be a good idea to track your mileage for business-related trips, and there are apps that can help one track mileage. If you can approximate that you are using your automobile, say, 50% of the time for your business, then you will likely be able to make part of the car expense tax-deductible.
Here are some allowable deductions based on one's profession. Creators, social influencers, and gig workers can review to see how they can lessen their upcoming estimated tax due. There could be several other bonafide deductions, but this list is a good starting point.
Tax deductions by profession
Actors
Entertainment: Streaming services such as Netflix, Hulu, HBO and cost of movie tickets.
Haircare: Hairstyling equipment used for brand photoshoots (blowdryer, straightener, curling iron, hair accessories).
Makeup and accessories (mascara, lipstick, etc.).
Wardrobe: Attire used for photoshoots from fashion brands like Zara, H&M, etc.
Travel bloggers
Transportation: business-related expenses, including airline tickets and other travel expenses (taxis, tolls, parking, etc.).
Lodging and car-rental costs: (Airbnb, hotel, etc.).
Photography equipment (lens, tripod, film, camera bag, etc.).
Food and beverages consumed during business meetings.
Small-business owners
Home-office expenses (computer, paper, office supplies, printer, copy machine, multi-function unit, desk supplies, office chair, software, subscriptions, etc.).
Phone and internet bills.
Business interest and bank fees.
Charitable contributions.
Gas-mileage expense for business-related trips.
Rideshare drivers
Uber and Lyft fees and commission.
Business-related gas mileage.
Snacks and refreshments for passengers.
Fees for tolls and parking.
Car repairs and tire replacement.
Car insurance.
Related: 3 Steps to Make 2022 Your Best Tax Year Yet
It's crucial that self-employed individuals, creators, contractors and gig workers who aren't operating a business file their estimated quarterly taxes on time. Meeting tax deadlines will save you money by avoiding penalties. The IRS website offers a calendar of deadlines and extensions, so it's the best source to check.
Suppose you've prepared your tax filing on your own, and you're not sure it's correct. In that case, we always recommend calling or checking with a professional CPA to ensure you've captured all bona fide tax deductions to maximize your income-tax refund. Lastly, please don't wait till the last minute to get started; it will be almost impossible to get through to the IRS. Last year, they fielded 145,000,000 calls between January and the tax-filing deadline. In the meantime, keep up with your side hustles and continue to grow your business!
