There are a number of deductions to keep in mind for self-employed individuals. Lisa Greene-Lewis, CPA and TurboTax tax expert, provides a guide to tax savings.
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[00:00:04.88] TRACY BYRNES: So whether you're a full-blown entrepreneur or you just have a side gig and you drive an Uber car, you are going to get different forms in the mail this tax season, and you're going to have a whole slew of different tax write-offs that you need to pay attention to. Lisa Greene-Lewis, TurboTax Expert and CPA, is here with us right now. So first, let's start with the forms.
[00:00:25.58] As a reminder for people they're going to get this 1099-NEC in the mail. What is it, and what's it reporting?
[00:00:34.13] LISA GREENE-LEWIS: Yes. So they will receive a 1099-NEC. If you're new to self-employment, you won't see a big change. But in previous years, you would have received a 1099-MISC. But now it is a 1099-NEC, and it reports income from whether you're a freelancer, contractor, working a side gig.
[00:00:59.12] You could see income from that as well as the 1099-K.
[00:01:02.60] TRACY BYRNES: So the 1099-MISC stood for miscellaneous at one point, and this NEC, you said, is nonemployee comp, so I guess it makes sense. But I swear, sometimes, they just live to confuse us. But, that said, look for your 1099-NEC if you're self-employed. And then start taking tally of your deductions.
[00:01:23.24] So what are some of the things self-employed people should be on the lookout for?
[00:01:26.87] LISA GREENE-LEWIS: Yes, definitely claim anything that's directly related to your business because that can help the taxes you owe, whether it's your self-employment taxes or your overall federal taxes. You want to lower your net income. So if you've done advertising, marketing, bought equipment-- your home office, a huge deduction. I would definitely make sure that you claim that, if you're eligible.
[00:01:54.62] If you have an area in your home that's dedicated to working your business, you want to make sure that you take that deduction, which is a percentage of your mortgage interest, property taxes, rent, utilities, as well as depreciation.
[00:02:12.62] TRACY BYRNES: And in theory, when you say dedicated, it can't be the laundry room, can't be in the corner, or the kids' playroom isn't on the other side. It is a dedicated four-walls room, strictly for your office. TurboTax will absolutely walk you through that processing questions. So you mentioned things like equipment. So supplies, meals, if you take clients out, or travel. Make sure you keep all these receipts.
[00:02:39.44] Let's talk about retirement plans. What do self-employed people do with that?
[00:02:45.65] LISA GREENE-LEWIS: Yes. So self-employed, you can contribute to your SEP-IRA. It's very generous in how much you can contribute, and you may get a deduction for what you can contribute. And you can contribute the lower of 25% or up to $61,000 into your IRA for 2022.
[00:03:08.09] And you can do that up to the extended tax deadline and make an impact on your 2022 taxes.
[00:03:15.69] TRACY BYRNES: So that's October 16, just so people know. That's the extended tax deadline. Most of these people will-- many of these people, I should say, will be filing Schedule C. And I know TurboTax has a specific section or software to help Schedule-C filers.
[00:03:31.07] LISA GREENE-LEWIS: Yes. So we do have-- now it is our TurboTax premium. And so that handles self-employed as well as investors. And it searches for unique deductions for self-employed. Because there are so many unique professions now, and so it uses artificial intelligence, and it gets smarter and learns these professions. So it will surface deductions that you may not even be thinking that you will be eligible for.
[00:04:04.19] And it's based on your specific, unique profession.
[00:04:08.57] TRACY BYRNES: Yeah, it's worth the exercise. Because as an entrepreneur, you work so darn hard, you should get as much money back as possible. Lisa Greene-Lewis, TurboTax Expert and CPA. Thank you for all of that.
[00:04:20.42] LISA GREENE-LEWIS: Thank you for having me.
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