If you’re a freelancer, you probably dread tax season every year.
There are a lot of perks to being a freelancer. You get to work on your own schedule (for the most part), work remotely, and choose what project to embark on, all the while doing what you love. You still have to pay taxes as a freelancer, however.
We understand how confusing and annoying tax filing can be for freelancers, so that’s why we’re giving you this guide. Keep reading and you’ll find 5 indispensable pieces of advice for how to pay taxes as a freelancer.
1. Understand What You’re Paying For
Employees of companies don’t necessarily have to think about what their tax dollars are going toward. They may just know that it’s covering things like pension and healthcare. When you’re a freelancer, it’s nice to know what you’re paying for.
Self-employment tax, which you’ll be paying in addition to income tax, is a 15.3% tax in place to cover Medicare and social security. Every working American pays for these things, it just looks a bit different when you own your own company, as it were.
2. Know What to Write Off
Tax write offs for freelancers can be a bit more confusing than normal employees. Many people are tentative about writing things off, but there are a few key things you should consider.
Typical freelancer tax deductions include any work-related lodgings, travel, dinner, home office supplies and utilities, marketing expenses, health insurance, and electronics. This is where it’s really beneficial to think of your freelance work as a business. Don’t be shy about writing things off, but don’t be egregious either.
3. Stay Organized
When you’re a first-time self-employed taxpayer, you may underestimate how organized you have to be. When you’ve got money coming in from a variety of clients, you’re going to be dealing with a lot of paperwork.
Keep all of the paperwork, like 1099 forms, receipts, and expenses. Make sure it’s organized in a way that won’t confuse you when you start filing taxes. Do a bit of research on how businesses do bookkeeping and you’ll get some inspiration for your own.
4. Get Help to Start
For your first year as a freelancer, it can be really beneficial to hire a tax accountant. They’ll be able to walk you through the process and outline everything you should be claiming, writing off, etc.
Learning how to do it the right way can help your future self. If you start out filing incorrectly and you keep doing that for years, you’re eventually going to get audited.
5. Consider Quarterly Payments
One thing every freelancer should consider is making quarterly tax payments instead of annual ones. In some situations, you’ll actually have to do it this way.
Regardless of how much money you’re bringing in, quarterly payments can make it easier to budget and file taxes every year.
Filing Taxes As a Freelancer Can be Easy
As long as you’re diligent and organized, filing taxes as a freelancer can be easy. Learning how to pay taxes as a freelancer is the hardest part. Once you know what to do, you can repeat the process seamlessly every year.
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