Taxpayers who miscalculate taxes owed are likely to get a form called a CP2000 from the IRS. According to the agency, that form means, "the income and/or payment information the IRS has on file doesn't match the information on your tax return." That could result in issues with your tax bill.
Jaeger said the best way for gig economy workers to avoid a tax misstep is to be diligent and plan ahead now. He provided the following tips to help freelancers get on track so they're ready to tackle taxes head-on this tax season.
1. Get organized
Whether you work full time and earn a little extra cash from a side hustle or you're a full-time contractor, meticulous record-keeping is a must. One option is to keep track of all business expenses and related receipts in one large folder. Jaeger recommends taking that one step further by categorizing receipts into specific folders - for example, one folder for mileage and maintenance records, a second for rent or dues if you lease a workspace, and a third for office equipment and business-related equipment. Once a quarter, as you determine what you'll owe for quarterly tax payments, make note of which of those receipts are deductible.
2. Keep track of your income
When you're freelancing, you're your own accounting department. Not only are you responsible for generating invoices and collecting payment, you must also keep track of all income earned and accurately report it to the IRS. That can get complicated when multiple income streams are at play.