Starting out as a freelancer of any kind is exciting. You’re doing your own work at your own pace in most cases, and the money is great initially because you don’t necessarily have to deduct taxes yet.
The idea of dealing with your own taxes, though, can be stressful until you’re faced with it come tax time. We’re going to give you some essential tips on filing taxes as a freelancer so you don’t have to try to stress as much this year.
When it comes down to it, filing as a freelancer is only a little more complicated than doing it as an employee.
Filing Taxes as a Freelancer: What You Need to Know
It would be difficult to cover every aspect of filing, so we’ll cover some of the essentials in this article. That said, taxes aren’t a mystery.
If you’re having trouble, someone else is bound to have had trouble as with it as well. There are answers to all of the tax questions out there, so don’t give up or get down on yourself.
Let’s get started:
1. Keep Receipts
You would be surprised by the things you can potentially write off as business expenses. That is, a lot more expenses have to do with your business than you would think.
Keep your receipts and make sure they’re orderly. You will be able to cut huge sums off of the amount you owe if you can reasonably prove that those expenses had to do with your business.
We’re by no means suggesting that you fib those numbers. Just do some research to find out what constitutes the term, “business expense.”
2. Plan Ahead
Most people are used to getting paid come tax time. So, when you become a freelancer, it might come as a shock to you that you have to pay money.
If that throws you off guard, you can do your best to monitor your expenses and save accordingly. Additionally, you’re able to pay quarterly if you wish. That way, you aren’t faced with such a huge bill at one time.
3. Prove Payment
It sounds weird, but you can give yourself pay stubs. There are a lot of situations in life when pay stubs are needed, and you don’t have to be at a disadvantage just because you’re a freelancer.
Seek out a pay stub maker and generate stubs for yourself in the case that you need them.
4. Keep Track of Sources
As a freelancer, you’re required by law to file taxes on any source of income that you have. On the flip side, any business that pays you more than 600 dollars in any given year is required to send you a 1099 Form.
This is essentially a form that’s the equivalent of a W-2 for freelancers. Keep in mind that small payments made in cash still count, although there may be no way to track those things on your end.
You may be surprised to know that the IRS won’t come and lock you up if you make a mistake on your taxes. Sure, avoiding your taxes or committing fraud might get you locked up, but any honest mistake in the book is nothing to be concerned about at all.
The worst that will happen is you might have to make a correction or clear up some confusion. Everyone makes mistakes because taxes are difficult sometimes.
Need Some More Help?
Dealing with taxes as a freelancer can be tricky at first but you will do just fine. You have the skill and tenacity to work for yourself, so you can certainly manage to figure out a measly little tax form.
That said, we all need a little help sometimes. Explore our site for more useful information on taxes and finances.