Self-employed individuals, on average, pay higher taxes. For anyone contemplating self-employment, that is a factor that is significant. That said, there are situations that can lead to lower effective taxes being charged by self-employed individuals.
If you are self-employed, there is a lot you need to know regarding taxes. You need to track your expenses and make sure that you are on the right track. Whether you are a self-employed chef or caterer, here is what you need to know about taxes.
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Self-Employed People and Independent Contractors
A self-employed person does not work for a single employer who offers them a fixed regular wage. A self-employed person can also be called an independent contractor or a ‘freelancer’.
If you want to learn more about taxes, here is what you need to do. It is highly recommended to understand what deductions to take on your tax forms, consider checking out this list of independent contractor write-offs to know if you are qualified to make claims. Success on your tax return depends on you. In most cases, they are hired as a non-employee to do work for or provide services to another entity. As a consequence, contractors have to pay taxes on their own Social Security and Medicare.
Specifics of the Law
There has been a lot going on throughout the years. Several modifications to self-employed tax deductions were made by the Tax Cuts and Jobs Act (TCJA), approved in December 2017 and implemented since the 2018 tax year. The good thing is, some of the changes made are temporary but some are permanent.
If you have an employer, your employer is the one that is paying for your Medicare and Social Security. If you are self-employed or a freelancer, then, you have the responsibility to pay for them.
However, self-employed people will be able to subtract from their business profits certain medical costs, such as the cost of their health and dental benefits. You should subtract any medical costs required for you to operate if you have a disability, instead of claiming them as personal medical deductions.
Other Tax Deductions You Can Consider
Self-employed people should write off all the costs of professional services. You can get a tax deduction by doing it. Any professional service deductions must be specifically related to your business. You can also write off the cost of your taxes as well when you employ independent contractors to assist you to finish the project.
What You Should Know
As a self-employed caterer or chef, it is your responsibility to pay tax and sort out your national insurance contribution. But, sometimes, you can get a government tax refund depending on what kind of work-related expenses that you incurred.
The question is, what are those? Continue reading to find out about these work-related expenses as a self-employed caterer or chef. These things can be a great help to you as a self-employed individual.
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1. Chef Uniform And Footwear
Believe it or not, you can claim tax back for the cost of laundry of your chef uniform and apron. The standard rate for this is about twenty to thirty percent of what you pay.
Also, your non-slip footwear is included. You can reclaim tax for it if you have incurred this kind of expense. If in any scenario that your work clothes need repair or replacement, you can make an expense claim on it. Work clothes that chefs and caterers often used are the uniform, pants, jackets, chef’s hat, apron, hair net, gloves, and goggles.
2. Work Equipment
Making expenses claims on the cost of cleaning, repairing, replacing your essential equipment is included at this point. Some of this work equipment are the following: Knives, cooking utensils, electric appliances, pans, steamers, baking equipment, glassware, chopping board, food processors, and many more.
3. Chef Training
Keeping your skills up-to-date is very important for caterers and chefs. This is why they still continue to learn, by taking up additional courses. It can be costly but most expenses for work-related courses are tax-deductible, so you do not have to worry about it. Though, the course that you are taking should be related to your main role in order for it to qualify.
Here are some of the things that you may be able to claim: tuition fees, accommodation, travel expenses, equipment costs, technology costs (mobile or computer), textbooks, journals, amenities, and many more.
4. Traveling Expenses
If you made business travels as a caterer or chef and used your own vehicle for it, you may qualify for a claim. As you can see, it is the money you spend on travel that entitles you to a tax refund in certain situations.
The tax relief rules state that any position you have served in for less than 24 months will qualify as a “temporary workplace” for tax purposes. Moreover, most tax refund requests are subject to this transportation to temporary workplaces.
What You Should Do
Know your tax rate before you can assess your tax obligations and decide whether separate city taxes are needed by your region. It is advised to calculate your net profit or net loss from your business first.
You must first understand the tax rate, as well as any state and local taxes that may apply to you, to plan to file your taxes. In order to calculate your tax rate, you must first determine your net profit or loss.
You should get as many details as possible about your career as a chef. Next, all the expenses you have incurred should be gathered together. You should take note that if you changed occupations, you can report expenses for up to four tax years. In any manner or aspect, this will not affect your current job.
Any examples of information that you might need to gather and collect are specifics of places where you have been located, notes of equipment that you have bought specifically for work purposes, and any information that you think may be important to your claim.
When setting rates, self-employed people, including freelancers, must take their taxes into account, consider their tax burden in the preparation of their yearly finances, and monitor their business expenses to deduct them at the end of the year. There are existing laws on what you can claim if you are a self-employed caterer or cook. Once again, it comes down to vital expenses.