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MIAMI (CBSMiami) – The world of work is in flux as workers are leaving jobs in droves. Many in the “Great Resignation Generation” are freelancing, taking gig jobs, no longer employed in a traditional manner and that brings new tax challenges. Yes, taxes.
You have to pay taxes on anything you make in non-traditional freelance employment.
That’s the word from Gus Rodriquez, the registered tax agent at Tax House.
“The beautiful side of freelancing is you get to make money, spend money and then pay tax versus the W-2. You make money, get taxed and you spend it,” said Rodriguez.
The folks at “The Tax House,” cranking out tax returns for individuals many of whom are facing paying quarterly taxes for the first time and they have a warning that the IRS is on alert.
Rodríguez told CBS News Miami, “They are auditing a lot more, auditing more for 2021. So, put your guard up.”
What are the typical tax issues facing taxpayers if they left the traditional workplace?
Tax no longer withheld, working from home tax implications, operating as a sole proprietor, what can and cannot be written off?
Rodriguez said, “This is a time to be super organized, be responsible and be careful.”
The hard fact, no matter what you have to file, an income tax return and self-employment means you have entered a whole new world of tax regulations.
Rodriguez warns, “You are supposed to pay estimated taxes payment quarterly, but if it is under a $1,000, you can skip on the first year.”
He said if you are doing your own taxes, you need to check a box saying this is your first time filing and the IRS might be forgiving once, but with the complexities of federal tax regulations for the individual, it is probably smart to hire a tax professional.
“It is hard to determine what you owe, really what you make, minus expenses and then you calculate three different taxes: federal, social security and Medicare.”
All of that can add up to serious money, which can total 15% of your net income, but tax preparers say setting aside 20-25% for quarterly payments is a good idea.
So, if a person has left their “day job” and is working independently, freelancing, the best advice is to file a tax return and the key is setting up a properly calculated quarterly IRS payment.
You do not want trouble with the IRS while dealing with new work realities.