It’s tax season! Workrise is here to help.
Thanks to online marketplaces like Workrise, it’s easier than ever for people to work for themselves as 1099 independent contractors, especially in industries like oil & gas.
With the great freedom of contract work, however, comes the great responsibility of 1099 taxes.
We recommend speaking to a tax professional when preparing your taxes to make sure you’re getting as much of your hard earned money back as possible.
In the meantime, here are some industry tips to help you get the most out of your taxes with the least headache possible.
PREPARE FOR TAXES
Separate Your Accounts
Separate your business and personal accounts from the beginning of the year, so you can easily calculate deductions.
Pay Your Quarterly Income Taxes
Pay your quarterly taxes – also known as “estimated taxes” – on time. W-2 employees have income taxes withheld for them on every paycheck. When you’re self-employed, you’re responsible for this task. The government requires quarterly payments from 1099 workers to make sure you’re keeping up with your taxes throughout the year. Contract workers can easily pay quarterly taxes directly through the IRS website. Monthly payment options are also available for the budget-challenged. Take note that your quarterly payments are due on the following dates:
- 1st quarter – April 15th
- 2nd quarter – June 15th
- 3rd quarter – September 15th
- 4th quarter – January 15th
Save For Your Self-Employment Taxes
Set aside around 15% of your total earnings to cover this tax that encompasses your cash contributions to Medicare and social security. W-2 workers make these payments automatically, and their employers pay half. As a 1099 employee, you’re required to pay this full amount yourself – so be prepared!
Estimate Your Total Taxes
Use a 1040-ES to estimate the total you’ll need to pay for the quarter. It only takes about 10 minutes to complete the worksheet.
Contribute to Your Savings
Keep a savings equal to at least a year of unemployment, if you can. It’s just good practice in the industry. Also, open a separate account just for your tax payments. Transfer 25% of each month’s earnings into this account.
Contribute to Your Retirement
As a self-employed person, you have the ability to fund thousands to a SEP (Simplified Employee Pension) or a Solo 401(k) in a tax deductible manner.
KNOW YOUR TAX CREDITS
Find out which credits you qualify for. Some common credits include:
- Child & Dependent Care Credits
- Lifetime Learning Credit
KNOW WHAT YOU CAN DEDUCT
Make sure you look closely at your ability to claim the following common expenses for your independent contract work on the oilfield
- Supplies, including rented and leased equipment
- Uniforms, protective clothing, and safety gear
- Fees for services you’re required to maintain
- Internet, phone, and satellite radio services
- Interest on business loans and credit cards
- Drug tests & required medical exams
- Trade publication subscriptions
- Vehicle expenses and mileage
- ATM & check reorder fees
- Home office expenses
- Continuing education
- Association dues
- Travel & Parking
KNOW WHAT YOU CAN’T DEDUCT
Don’t try to deduct the following expenses. This could lead to an audit and a costly headache.
- Expenses reimbursed by employer
- Time incurred working on your own equipment
- Income lost for dry runs and unpaid mileage
- Utilities not used for business purposes
- Personal vacations
- Everyday clothing
- Commuting costs
HIRE A PROFESSIONAL
Remember that it’s always best to work with a CPA when preparing your taxes.
For more info from the IRS, click here.