Being self-employed as a freelance worker can provide so many exciting opportunities and freedom, but also comes with a unique set of challenges. One challenge in particular is staying compliant and doing everything needed with taxes.
As a freelancer, you don’t have an HR or payroll team to help you understand what you need to do. This blog will help you understand the steps you need to take as a freelancer to save money and plan well for taxes.
Document Business Expenses You Can Write Off
As a freelancer, there are many expenses you can write off to reduce your taxable income. Some are less obvious than others, so let’s take a look at what fees you can deduct.
- Office Supplies
- Software
- Professional courses and certificates
- Office space (home office included)
- Some traveling and food expenses that were used for business purposes
- Marketing tools
Check State Requirements and Deadlines
Every state has its own requirements for taxes. Depending on the state, you may be required to submit a business license and pay filing fees when doing your taxes.
Always know when your deadlines are. The deadline for filing taxes is April 15th, along with quarterly payments due the 15th of April, July, September, and January. Since you don’t have taxes withheld from paychecks, it is your job to estimate what these tax costs will be, including SS and self-employment tax, and make payments on those quarterly dates.
Take Advantage of a CPA or Accounting Software
Connecting with a CPA Rexburg can be extremely beneficial for those who are self-employed. They can give you financial advice, help you stay compliant with taxes, and ensure you are making the best decisions to save you money. They understand the complexities of taxes and can help you understand the ins and outs of your industry.
Track All Income
Since you receive payments from clients rather than having a salary job, it’s important to keep track of the income you receive from different sources. Keeping a detailed record of these as they come in will save you a lot of time trying to gather everything last minute. You can also use a 1099 form to report all of this information to the IRS.
Have a Separate Business Bank Account
As a freelancer, it’s easy for your business and personal funds to get mixed together. It’s very important to have a separate account for your business so that it’s easier to track expenses and reduce auditing risk. This can help simplify the tax process in the long run.
Save!
Aim to save around 25-30% of your income for tax purposes. You can set aside this money in a few different ways, but a good idea is to put it into a high-yield savings account to ensure your money is extra protected and that you can continually save more by having a higher interest rate.
Conclusion
Taxes can be complex work, especially for those who are self-employed. These tips are here to guide you through and simplify the process for staying compliant and achieving maximum savings.
