Core+ Tax Strategies is Now Plains Tax Strategies – Same Experienced Team!


Today’s workforce includes both full-time employees and independent contractors, also known as 1099 workers or gig workers. In addition to full-time employment, some workers may have side jobs like grocery delivery or rideshare, or they may work solely as independent contractors in fields like real estate, art, and music.

Whether or not the jobs are small and supplemental or full-time careers, they all fall into the independent contractor/1099 category. If you are paid more than $600 by any individual client, then they are obligated to report it to the IRS. If you are not an employee of that company, that is considered self-employment income. If you are considered a full-time employee somewhere and doing freelance work on the side, you will need to report any income over $400 to the IRS as a self-employed worker. Sound like you? Here are a few tips to help you minimize your tax bill.

Keep track of your expenses

As an independent contractor, you can deduct certain expenses related to your business. Keep track of receipts and invoices for expenses such as office supplies, travel, and equipment.

Make estimated tax payments

Unlike traditional employees, 1099 workers are responsible for paying their own taxes throughout the year. If you make more than $400 a year, you will need to make tax payments quarterly. The IRS has four due dates set for these payments, however, you can make more frequent payments throughout the year if you find that to be more manageable. (Don’t forget you’ll also have to pay your own self-employment tax, to cover Medicare and Social Security.)

Understand your deductions

Take the time to learn about the deductions you’re eligible for, including the home office deduction and the self-employment tax deduction, in which you are allowed to deduct 50% of what you pay in self-employment tax as an income tax deduction on Form 1040. These can help reduce your taxable income.

Also, be aware of any state income tax laws that may apply. Texas does not withhold income tax, however, if you worked in other states that do you may need to file multiple state tax returns and there is a “right order” in which you should file these returns.

Health Insurance

As an independent contractor you can deduct all your health insurance premiums without itemizing them (which will help to reduce your adjusted gross income.) – as long as it is a private plan, if you have insurance through an employer, your employee paid portion cannot be deducted. And if you have a spouse or dependents, you can also deduct the cost of their health premiums.

In addition, if you hire your spouse and provide them with health insurance as an employee, you can deduct the cost of the insurance from your self-employment income and tax, so long as you yourself are included on the plan.

Stay organized

Keep all of your tax-related documents in one place so you can easily access them when it’s time to file your taxes. Paper copies of receipts for business expenses and costs can be useful, however, they aren’t necessarily the most convenient and can be hard to keep track of. Ink can easily fade from printed receipts, so scanning to secure a digital copy can be a lifesaver, especially if you are ever audited.

Consider using accounting software or hiring a tax professional to help you stay on top of your finances.

Open a Retirement Fund

As a self-employed worker, you have options when it comes to saving for retirement. The IRS allows you to contribute up to 25 percent of your net earnings from self-employment – with a max of $66,000 in 2023 – to a Simplified Employee Pension (SEP) IRA. You can also contribute up to $15,500 in 2023 to a SIMPLE IRA if you’re a sole proprietor. And last but not least, you can make annual salary deferrals up to $22,500 in 2023 either on a pre-tax basis or as designated Roth contributions. There are also, additional “catch-up” and matching contributions that can be made based on your age.

Hire your kids

You can deduct your children’s wages on your Schedule C form. If they are under the age of 18, they will be exempt from Social Security tax, and if they are under 21, they won’t have to pay Federal Unemployment tax either. The money you pay them won’t count toward your taxable income and depending on how much they are earning, they probably won’t have to pay taxes. Plus, you can contribute to IRAs for them as well.

Being a self-employed worker offers many benefits, however, reaping every advantage can be cumbersome and confusing. Our team of tax professionals and financial advisors can assist with determining and verifying your status while considering your unique situation to help you keep more of your money.