NEW YORK (MainStreet) Growing numbers of Americans are now self-employed. In fact, Quartz recently reported that by the year 2020, as many as 40 percent of American workers will be freelancing. If you received a 1099-MISC form this year, you're going to have to file as a freelancer, at least in part. If this is your first time doing so, you might be in for a big sticker shock.
But before you panic, know that there are some things you can do to ease the pain. You can't retrace your steps from last year, but you can mitigate some of the damage as well as prepare for next year.
It's Never Too Late
"The process needs to start last year," says Janet Lee Krochman, a self-employed CPA, who says that every year people show up and hear all the stuff they should have been doing... right before their eyes glaze over. "If you haven't been collecting the data over the last year, you're going to wish that you had."
The solution going forward? Krochman recommends getting QuickBooks or something like it to keep track of your self-employment finances over the year. "The basic version, QuickBooks Essentials, can produce a report with everything that you need based on information you input over the course of the year," she says.
For last year, however, you're just going to have to start digging around in receipts and bank records looking for deductible items.
Save or Expect to Pay Big
"People think 1099s are just like W-2s except they didn't have anything withheld," says Bradford L. Hall, managing director of Hall & Company CPAs in Irvine, Calif. "You also owe Social Security and Medicare tax that you probably haven't thought about." He cites this as the biggest mistake that people make when setting up a business -- to the tune of 15.3%.