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If you’re a mom who works from home, you’ll likely face tax issues at some point during your career. These aren’t necessarily things that will destroy your life, but they can put a downer on all of your efforts. In this post, we’re going to look at some of the tax issues that you might face and what you can do about them. Here’s everything you need to know.
Always report all of your income
The first thing you want to do is always report all of your income, including your side hustles. A lot of work-from-home mums have a main job and then they have multiple activities on the side. They report the main one but don’t report the side hustles, which can lead to audits and other investigations by tax authorities.
If you’re not sure whether something counts as income, speak to your accountant.
Difficulties with home office deductions
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Home office deductions are a real thing. These allow you to deduct the cost of running your home office from your expenses. This makes sense since you’re using part of your home for business purposes and it’s incurring costs like utility, internet, and rent/mortgage interest payments.
The rules around home office deductions vary between countries, so you’ll need to think carefully about how much you can deduct for yours. You must use a space strictly and exclusively for business in most locations, so always check the rules with your accountant.
Self-employment taxes
Self-employment taxes can also create issues for freelancers or business owners. Therefore, always use MTD for self assessment. Make sure you have the help of an expert who really understands how the system works.
Unfortunately, when you’re self-employed, no automatic withholding occurs. Your employer, because you don’t have an employer, isn’t going to withhold your taxes for you automatically to keep you compliant and to protect you from the authorities. So you’ll need to make estimated payments in a lot of cases when paying self-employment taxes. The downside is that this can feel like a burden if you have a regular income. Sometimes your income is up, and other times it’s down, but you still have to pay estimated taxes based on what you paid last year.
Family and business expenses
Based on the last point, it’s also challenging to balance your family and business expenses. You might want to spend money by going on vacation. That might mean that you lack the money to pay your taxes later in the year. You might also experience a downturn in your finances, which makes it even more challenging to build up money.
Be careful when you claim expenses on personal items. For example, don’t claim on kids’ toys as office supplies, as this is the sort of thing that tax authorities can pick up on. Try to stick to the items that you really need in your business, like stationery supplies, desks, and internet or phone bills.
So there you have it – some tax issues that work-from-home mums often face.
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