How to Handle Taxes as a Freelancer
Believe it or not, the due dates for taxes (mid-April) are right around the corner and honestly, you should be thinking about them NOW.
Most accountants want all information by mid-February to mid-March to get ahead of tax season.
When I started freelancing, I was terrified of taxes. It almost made me not want to start the business. No matter how many times people explained it to me, I just couldn’t get it.
When I started freelancing, I was terrified of taxes. It almost made me not want to start the business. No matter how many times people explained it to me, I just couldn’t get it.
Why do I need to pay quarterly?
How do I calculate it based on income?
What about items like my home office, cell phone bill, internet?
Honestly, I ended up hiring someone. But that someone, Adam Knihtila, really helped me understand a lot.
So, I get it. Truly. I understand that managing taxes can be a daunting task, especially for freelancers.
I’m here to guide you through the intricacies of handling taxes as a freelancer.
Dive in for more information…
1. Keep Impeccable Records:
Maintaining organized records is key to a stress-free tax season. From invoices to receipts, ensure all your financial transactions are documented. Consider using accounting software or apps to streamline this process.
My recs: Quickbooks, Freshbooks, InvoiceNinja, Zoho books.
2. Understand Your Deductions:
Freelancers are entitled to various deductions and this always tripped me up. Home office expenses, mileage on your car, and even a portion of your internet bill may be eligible for deductions. Do some research online to find out what freelancers can normally deduct.
3. Set Aside Estimated Taxes:
Have you downloaded my Money Mapper yet? I created this specifically to help newbie freelancers with expenses and taxes every month. The recommendation I always give is to set aside 30% of your income for taxes. That is usually the maximum amount so hopefully you’ll get a refund if you give too much.
By setting aside the 30% of your income throughout the year to cover your tax obligations, it can help prevent a financial shock when tax season arrives.
4. Seek Professional Advice:
Honestly, hiring Adam was one of the best decisions I ever made. So if this is something that is daunting and overwhelming, but you’re still bootstrapping, you can always do most of it yourself and hire someone to review it. Call local accountants in your area so you can meet in person. They can provide personalized advice based on your unique situation and ensure you're taking advantage of all available deductions.
Now that the fear of taxes has hopefully lessened, onto exciting news! 🎉 I am thrilled to announce my upcoming Freelancer's Cohort starting this March. This cohort will provide a platform for freelancers to completely rehaul and revitalize their freelance business.
Every week, we go through assignments, give your business the personalized attention it needs, and make sure you are getting the lifestyle you want (more money and less hours, amiright?). With the support of other group members and our shared experiences, it’s designed to support your professional journey to give you your sanity back.
Register early - before March 1st - using the code, “EARLY”, for a $100 discount!
Plus, enjoy a bonus pre-cohort call with me to dive deep into your business and set personalized goals.
Keep your eyes open for the next newsletter where we go into insurance and if you do really need it for your freelance business (hint: it depends, like everything else lol!)
Taxes or bust,
Kiri