Tax preparation is challenging enough for people with a single income stream. For those with multiple forms of revenue, the process can become quite complex, which increases your chance of making an expensive error. The following explains how to approach filing under these circumstances. 

Understand the Different Types of Income

People earn money in many different ways. Full-time workers earn an income from their employers, while those who freelance or are self-employed earn money from clients based on work performed. Income can also be derived from rental properties, dividends, government payouts, and withdrawals from retirement accounts. Even gambling winnings are considered a form of income by the IRS, so be sure you’re thinking broadly when involved in tax preparation. 

Know Which Forms to Use

Independent contractors need to use different forms to report their income. Form 1099-MISC must be filled out for every project that garners you $600 or more per year. Additionally, you’re responsible for taking taxes from your earnings in order to pay the IRS. This is not the case when working for an employer. In this situation, taxes are taken from your paycheck automatically. 

Some Expenses Can Be Written Off

If you are self-employed, look for deductions to lower your tax burden. For instance, money spent on fuel costs, business supplies, insurance, home office expenses, and legal services could be deducted from your taxes depending on your situation. Deductions can be tricky and you may be subject to an audit if yours are questionable. That’s why many business owners and independent contractors consult accountants to make sure they’re in compliance. 

With more than three decades of experience under their belts, Selph and Friday, CPA can make sense of even the most complex tax preparation process. Whether you have multiple types of income or need assistance with small business taxes, these accountants are ready to help. They also provide IRS representation in the event you’re subjected to an audit. Schedule a consultation in Texarkana, TX, today by calling (903) 792-0281. Visit the website for the complete listing of tax services.