Tax Tips for Freelancers
posted on February 3, 2016 | by Amanda Holstein
Sigh…it’s time to talk about taxes.
Honestly, nothing has ever been so intimidating to me than taxes, especially as a new freelancer. Luckily, there are so many great resources out there for newbies like me. This year, I’ve finally decided to try out TurboTax because I’ve heard such great things about how easy (and fast!) it is to use. They’ve also graciously partnered up with me today in my attempt to share some tax tips for freelancers :).
Now, let me be clear — I am in NO way a tax expert, let alone a novice. I’m more like a newborn. But why do taxes need to be so hard? I mean, I’m a smart person who has somehow managed to run a business on my own, so why should taxes be intimidating? I decided to sit down, do some research, and figure out how to make this process easier once and for all. TurboTax was a BIG help because they speak to you in a language you can understand, they let you upload your W2s and 1099s by simply snapping a photo with your phone, and they even offer the option of video chatting with an expert! These tips I came across below have been a major help as well.
1. Track your income
Keeping a detailed record of your income is super helpful, not just for filing your taxes, but for growing your business as well. Many people use online tools to send out invoices and keep track of payments. By the time you have to do your taxes, you’ll have a detailed record of how much you’ve made and where that income came from. It’s also really helpful when collecting 1099s (more on that later!).
2. Keep a record of your expenses
This is a BIG one that will save you so much time (and money!). It’s not only helpful to save all of your receipts, but I also recommend literally recording them in a spreadsheet (or any way that works for you). That way you can categorize them and easily figure out what is tax deductible by the time tax season comes around. Not sure what expenses are tax deductible? This list should help!
3. Be on top of your vendors for 1099s
As freelancers, our revenue comes from so many different vendors, so it’s important to be on top of them for 1099s. These forms are essential for filing your taxes, so rather than waiting to receive them, take the initiative and ask for them directly. Make a checklist so you can keep track and ensure you’ve received one from every client you’ve earned income from that year.
4. Make quarterly payments
This is a new one I personally hadn’t heard before, but most freelancers are actually supposed to pay their taxes on a quarterly basis. (Find out if you should be doing that here). Honestly, I think this sounds much easier because you can focus on just 3 months of income and expenses at a time. The deadline to pay your taxes on a quarterly basis is on the 15th of April, June, September, and January. You will still file your annual return once a year as well (by April 15th).
5. If you’re not sure, ask!
There are SO many resources out there to help you understand your taxes better. The IRS actually has a great page all about filing taxes for the self-employed. TurboTax has an AnswerXchange as well where you can literally ask whatever question you want about taxes. Do your research, and you’ll be fine!
What are some of the ways you make doing your taxes easier?