Being a 1099 contractor has its perks—freedom, flexibility, and the power to control your income. But it also comes with tax headaches that can catch you off guard. If you’re new to self-employment, you might already be making costly mistakes without even realizing it.
At Insogna CPA, we help Austin Texas contractors like you stay compliant, lower taxes, and avoid penalties—so you can keep more of your hard-earned income. Let’s break down the top tax mistakes we see all the time (and how to fix them).
1. Not Planning for Quarterly Taxes
Ever been hit with a surprise tax bill? You’re not alone.
When you’re a W-2 employee, taxes get automatically withheld from your paycheck. But as a 1099 contractor, you’re responsible for paying self-employment taxes—and the IRS expects you to pay quarterly.
Why It Matters:
- Missing quarterly tax deadlines could mean penalties and interest.
- Paying taxes late can disrupt your cash flow.
Fix It:
- Set aside 25-30% of your income for taxes.
- Mark IRS quarterly deadlines on your calendar (April 15, June 15, Sept 15, Jan 15).
- Not sure how much to pay? A small business CPA in Austin can calculate it for you.
2. Missing Out on Easy Deductions
If you’re not tracking your business expenses, you’re probably overpaying on taxes.
Why It Matters:
Every business-related expense you don’t deduct means you’re paying taxes on income you didn’t need to.
Common Missed Deductions:
- Home office expenses.
- Business mileage and travel.
- Software subscriptions and tools.
- Continuing education and certifications.
Fix It:
- Keep receipts for everything related to your business.
- Use apps like QuickBooks or Expensify to track expenses automatically.
- Book a consultation with a CPA South Austin to ensure you’re maximizing every deduction legally.
3. Disorganized Bookkeeping
Be honest—are your records all over the place?
Disorganized finances can lead to missed deductions, inaccurate tax filings, and stressful audits.
Why It Matters:
- Disorganized records make it easier to miss deductible expenses.
- If the IRS audits you, you’ll need clear records to back up your deductions.
Fix It:
- Open a separate business bank account for income and expenses.
- Use bookkeeping software like Xero or QuickBooks.
- Set a monthly reminder to review your records or hire an Austin CPA firm to do it for you.
4. Operating Without an LLC
Are you still operating as a sole proprietor?
Many contractors don’t realize how vulnerable their personal assets are without proper legal protection.
Why It Matters:
- If someone sues your business, your personal assets (like your home) could be at risk.
- LLCs offer liability protection while keeping your taxes straightforward.
Fix It:
- Form an LLC in Texas to protect yourself.
- Consult with a CPA in Round Rock, TX to explore the tax benefits of an S-Corp election if your earnings are higher.
- Keep business and personal finances separate for added protection.
5. Paying Too Much in Self-Employment Taxes
If you’re paying self-employment taxes on every dollar you make, there’s a smarter way.
The Reality:
Self-employment taxes = 15.3% of your net earnings. If you’re making over $50,000 annually, this adds up fast.
Why It Matters:
Without the right structure, you’re likely overpaying taxes.
Fix It:
- Consider electing S-Corp status.
- As an S-Corp, you can pay yourself a reasonable salary and take the rest as profit distributions—not subject to self-employment taxes.
- Not sure if it fits your business? An Austin accounting service like Insogna CPA can walk you through it.
6. Ignoring Compliance Requirements
If you’re not staying on top of deadlines and reporting, you could be facing costly fines.
Common Oversights:
- Forgetting to send 1099-NEC forms to subcontractors.
- Missing IRS deadlines for quarterly payments.
- Failing to report all income sources.
Why It Matters:
The IRS doesn’t take missed filings lightly—late payments can result in penalties and audits.
Fix It:
- Stay informed on federal and state filing deadlines.
- Issue 1099 forms to anyone you pay over $600.
- Partner with a professional CPA firm in Austin, TX to stay compliant year-round.
Let Insogna CPA Help You Avoid These Costly Mistakes
You’re great at your work—whether you’re a creative freelancer, contractor, or consultant. But tax laws? That’s where we come in.
At Insogna CPA, we specialize in helping 1099 contractors and self-employed professionals just like you:
✅ Plan for Quarterly Taxes: Stop stressing about deadlines.
✅ Maximize Deductions: We’ll make sure you keep more of what you earn.
✅ Simplify Bookkeeping: Get your records organized and audit-proof.
✅ Optimize Your Business Structure: Discover if an LLC or S-Corp makes sense for you.
👉 Ready to Stop Overpaying Taxes?
Let’s build a tax plan designed for your business. Schedule a free consultation with Insogna CPA today—the best CPA in Austin for 1099 contractors looking to keep more of their money.