Doing your taxes each year is pretty much a no brainer until you start working freelance. Doing freelance taxes can be complicated and frustrating if you have no idea what you’re doing. There’s so much that goes into them since you technically qualify as both employee and employer.
The good news is that once you get through it once, every year after that will be simple. As long as you keep a steady tab on your income anyway.
Check out this tax guide to learn how to get through your first year as a freelancer without getting in trouble with the IRS.
Gather Up Your Income
If you’re like most freelancers, you probably have money coming in from several different sources. It can be hard to keep up with but you need to keep tabs on all your income.
You have to report all of it. Most of your clients will send you a 1099 form. That helps but you may not receive one from all your income sources. This means you’ll have to enter the amount manually.
We recommend using hecticapp.com. It will help you keep up with all your freelancer paperwork. Not only your income.
Self-Employment Tax
Working as your own boss seems glamorous until you have to do taxes as a freelancer and see the self-employment tax. You can expect to pay about 15%.
This takes both common employee and employer taxes into account. The good news is that there is a way for you to reduce some of the fees you have to pay.
Deductions
Freelancers can deduct some of their expenses from their taxes. There are quite a few categories where you can save but we’re going to go over the most common ones.
Home Office
Most freelancers work from the comfort of their own homes. If you have a designated office space, you can write some of your rent and utilities off on your taxes.
Keep in mind that the room that you write off can only be used as your office space. You can’t spend 8 hours a day working on your couch and still take advantage of the savings.
Meals and Travel
If you meet clients for lunch, you can write these expenses off. You will have to show how much you spent along with where and when the meal took place.
Travel works sort of the same way. You can’t write off your week-long vacation to the beach but you can deduct that plane ride you took to undergo business training.
Equipment
One of the biggest setbacks of being a freelancer is that you have to pay for all your equipment on your own. We’re here to tell you that you can get a small return on your investment. You can deduct any equipment that you bought as long as you can’t do your job without it.
Don’t Stress Your Freelance Taxes
Being your own boss is great until you have to do your freelance taxes. There’s so much to keep up with that it can leave you with a massive migraine.
Take the stress off by going through some of the tips we’ve gone over here and visit the career section of our blog for more helpful pointers.
