I am not a tax specialist, but after more than 8 years of being a freelancer, I have learned a thing or two when it comes to making sure your taxes get done properly. This is meant to be a general guide to aid in the adventure of being a freelancer. Taxes can be a daunting task, but they don’t have to be. With a little planning and preparation, you can file your taxes accurately and on time. Here are some tips to help you get started:
Understand your tax obligations.
As a freelancer, you are considered self-employed. This means that you are responsible for paying your own taxes, including income tax, self-employment tax, and estimated taxes. You will also need to file quarterly tax returns with the IRS.
Keep track of your income and expenses.
It is important to keep track of all of your income and expenses throughout the year. This will help you to accurately calculate your taxes and ensure that you are not underpaying. You can use a spreadsheet, accounting software, or even a simple notebook to track your income and expenses. I recommend using a product called Wave. It is a free accounting tool that will get you started with everything you need without the overhead of a subscription.
File your taxes on time.
The deadline for filing your taxes is April 15th each year. However, if you are self-employed, you may be able to file an extension. To do this, you will need to file Form 4868 with the IRS.
Take advantage of tax deductions and credits.
There are a number of tax deductions and credits that freelancers can take advantage of. These can help to lower your tax liability and keep more of your hard-earned money. Some common deductions and credits include the home office deduction, the business expense deduction, and the self-employment tax deduction.
Get help from a tax professional.
If you are feeling overwhelmed by your freelance taxes, you may want to consider hiring a tax professional. A tax professional can help you to understand your tax obligations, track your income and expenses, file your taxes on time, and take advantage of all of the tax deductions and credits that you are eligible for. If you plan on using Wave, I recommend hiring a Wave Advisor to help you understand the fundamentals of their accounting software. It’s really worth the investment!
Freelance taxes can be a complex topic, but it is important to take the time to understand your obligations and file your taxes accurately. By following the tips above, you can make sure that you are in good standing with the IRS and that you are keeping as much of your hard-earned money as possible.
Here are some additional tips to help you with your freelance taxes:
- Keep a separate bank account for your business. This will make it easier to track your income and expenses.
- Pay estimated taxes throughout the year. This will help to avoid a large tax bill at the end of the year.
- File your taxes electronically. This is the easiest and most accurate way to file your taxes. We use HR Block!
- Keep good records. This will help you to support your deductions and credits if you are audited by the IRS.
- Get help if you need it. There are many resources available to help freelancers with their taxes, including tax software, tax professionals, and online resources.
Freelancing can be a rewarding path insomuch as you are willing to learn the ins-and-outs of small business. Don’t compromise on your financials and more importantly, your taxes. Happy learning!