Did you know that there are over 57 million freelancers in America? Although being your own boss is amazing, this gift can feel like a curse during tax season. Filing taxes for freelancers can be overwhelming at first, but it’s doable with enough research.
Do you want to learn how to make tax season less stressful? Keep reading for 9 helpful freelance taxes tips:
- You Don’t Have to Pay Quarterlies If It’s Your First Year
The good news about taxes for freelancing is that you’re allowed one year of no quarterly payments. After you file for the first time, it’s crucial to start making quarterly payments to avoid interest penalties.
- Making Your Own Pay Stubs Can Help You Track Your Income
Keeping track of your income is crucial for reporting an accurate figure to the IRS. This Generator can help you make pay stubs to manage your income records.
- Gather Your 1099s from Every Client Before Filing Taxes
The more clients you have, the more 1099 forms you’ll be responsible for collecting before tax season. Gathering this information will help you double-check your records to ensure your taxes are correct.
- Set Aside Enough Savings to Cover Self-Employment Freelance Tax
If you weren’t already aware, freelancers are required to pay a self-employment tax. The current self-employment tax takes 15.3% of your earnings to cover Social Security and Medicare.
- Deduct Your Office If Applicable
If you work from a home office, you may be eligible to deduct your rent or mortgage and utilities for that room. To qualify, your office must be the only space where your work is completed and no one else can use that room for a different purpose.
- Don’t Forget About Other Qualified Deductions
Aside from a home office, freelancers often have many other business expenses that can be counted for tax deductions. Travel, equipment, advertisements, and other business fees are qualified as long as the purchases are necessary for your business operations.
- Consider Starting Your Own Corporation
If your business grows, you may want to turn your freelancing profession into a real business. While there aren’t direct tax benefits of incorporating, you can better protect your assets if you ever face legal trouble. Freelancers who work in a field where lawsuits are a bigger risk benefit the most from incorporating.
- Consider Starting a Retirement Account
There are plenty of helpful retirement accounts that freelancers can open. Not only will you be able to save for your future, but all of your contributions may also be tax-deductible.
- When in Doubt, Get Professional Help
Although it’s possible to file your own taxes as a freelancer, sometimes there are too many balls to juggle for your comfort. If you fear that you could make a mistake, it’s best to hire a professional to avoid an audit. Another bonus of hiring an accountant is that you can deduct their fees for next year’s taxes.
With these 9 tips on taxes for freelancers, you can save big and stress less. Do you want to learn more ways to save money? Explore our blog for more brilliant tips.
