Whether you went into the gig economy out of necessity or you just like the freedom that the lifestyle offers, we live in a freelancer’s world right now. As exciting as it is to be your boss, it also comes with many challenges. For example, you can’t just fill out your 1099 tax form without knowing the rules or how to do it right.
So, what do you have to know about doing your taxes as a freelancer? What is it that you simply can’t afford to overlook? What are the secrets to mastering your taxes when you’re self-employed? Here are a few tips to help you answer these and other questions:
1. Secure Your Paperwork
You have to take the initiative when it comes to your bookkeeping because nobody’s going to put things neatly in a folder for you (unless you pay them to, of course). Thankfully, we’re at that stage of civilization where you can file an online tax return and scan receipts to store on your computer for later.
With that said, keeping a record of all your earnings and expenses and staying on top of all your tax-related obligations is important. As long as it has to do with your business, there has to be evidence of it.
2. Know What You Can Write Off
If you have regular expenses that your business can’t do without, they can generally qualify you for a tax write-off. From transportation to food, marketing to accommodation, there are many expenses you can claim back at tax time. Just remember that you’ll have to pay attention to every little detail because the goal is to get as many deductions as you possibly can.
3. Go With Quarterly Tax
The years won’t be the same when you’re a freelancer. What you made this year won’t be the same as what you made any other year. As a result, you might want to take advantage of the quarterly estimated tax payment arrangement made available to the public. This way, you’ll avoid getting slapped with penalties, and you won’t end up paying more than you should.
4. Partner With A Professional
The last thing you need as an entrepreneur is to get a surprise visit from the IRS. The best way to ensure you don’t overlook anything important is to hire an accountant.
The tax can be a lot to take in, especially for someone who doesn’t deal with a lot of paperwork. That’s why you need to seriously consider seeking help from an expert. Getting an accountant isn’t such a big deal these days. Indeed, many offer their services at a very affordable fee and as-needed basis.
5. Set Some Aside
If you want to avoid being in the red come tax time, put some money aside for taxes from every payment you get. Tuck away a fourth or a third of your income and separate these funds from your savings and investments. This is a safe and easy way of guaranteeing that you’ll be able to pay your taxes when the time comes.
You now have an overview of the most important things you should do and know about as a freelancer dealing with taxes. It’s important to make use of all the tips mentioned above, but you must also consider what’ll work best for you. The key is to have all your bases covered, so you can do your work without worrying about having an outstanding debt to the government.
