How Freelancers Can Prepare For Tax Season
Preparing for tax season is one of the best decisions that you can make for your business. Avoiding last-minute stress, cashing in on tax breaks and benefits, and receiving your tax return quickly are just a few examples of the many benefits of preparing and filing ahead of time.
Whether you have a small brick and mortar business or you’re a traveling freelancer, everyone has to file their tax returns. If you are a freelancer who would like advice on preparing for this upcoming tax season, here are a few of our best tips.
What Is A “Freelancer”?
A freelancer is a person who works for themself and is not committed to one employer on a long-term basis. Freelance work is also considered contract work.
How To Prepare For Tax Season:
Keep Track Of Business-Related Expenses
When working as a freelancer, there are tools you may need to do your work and additional spending that may be necessary. For example, home office expenses (a desk, technical equipment, etc.), transportation and lodging, internet and phone bills, certifications, and more might be necessary to get certain jobs done. However, they all cost money.
The good news is that it may be possible for freelancers to deduct all of the expenses listed, and more, from their taxes, which will lower their overall tax burden. Just be sure to keep all business and personal expenses separate, and you can save big on taxes owed this tax season.
Save A Percentage Of Each Paycheck For Taxes
Because pay can vary for freelance workers depending on the number of hours worked over a given time or specific jobs/contracts taken, taxes are not taken out of each paycheck received. Instead, freelancers are issued a 1099 at the end of the year from each employer, and will have to pay those taxes in for the previous year come tax season. To avoid last-minute panic, consider putting away a percentage of each paycheck; working with a CPA can help you decide what that percentage should be and if you should be making quarterly payments.
Freelancers have to pay income and self-employment taxes, so the percentage can vary. However, it is suggested to put aside around 25-30% of each paycheck to be later used for tax payments.
Work With Taurus CPA Solutions
Calculating your business taxes is tough, and freelance work can add even more confusion due to the number of “moving parts” that need to be considered. Please consider working with our talented team of CPAs at Taurus CPA Solutions to file correctly and receive the most tax benefits possible.
Our tax experts keep their fingers on the pulse of tax laws and regulations so all clients understand the potential tax-related ramifications of various business and financial decisions. Not all tax planning opportunities are readily apparent. By having us on your team, you are more likely to benefit from new opportunities.
Please visit our website to contact us, or give us a call at 410-465-4600. Also, be sure to keep up with our latest news by following us on Facebook and LinkedIn. We look forward to connecting with you!