If you’re a first-time freelancer, it may be a bit nerve-wracking to think of handling your own taxes as a newly self-employed filer. But with a little organization and forethought, managing your taxes is actually quite doable! Even if you’re freelancing as a side gig while maintaining a traditional full-time job, tax laws for self-employed apply to you. So, if you’re new to freelancing, here are some tax tips you’ll want to know.
If you haven’t started filing quarterly taxes, you may need to.
If you think your tax bill for 2016 will total more than $1,000 AND you expect to continue freelancing in 2017, the IRS will expect you to start paying your taxes quarterly rather than yearly because you are not having taxes withheld on a regular basis like you would do through an employer (Social Security, Medicare, FICA, etc). So, on April 18, 2017, you’ll not only be responsible for filing your 2016 taxes, but also your first-quarter 2017 taxes (for January 1 through March 31).
You also have a chance to pay your last quarter estimated taxes for 2016 by January, 17, 2017.
Be prepared for quarterly tax filings by getting all of your ducks in a row now. The rest of our tips will help you do that.
Start getting your documents in order now.
Sure, tax season seems like a distant prospect, but April will be here before you know it. Receipts for business-related expenses, payments you received from clients, and other paperwork are needed to complete your taxes.
Make sure to keep everything organized so when tax time rolls around you have it all compiled and ready when you sit down to do your taxes.
Know which deductions you might be entitled to.
Do you know which deductions you can take as a freelancer? Software programs like TurboTax, can help you identify all the deductions you might qualify for. You may be eligible for some of the top tax deductions related to health insurance, home office space and supplies, car or transportation expenses, continuing education programs, and even magazine or newspaper subscriptions. There are a lot of business deductions that you don’t want to miss out on to reduce your tax liability and save money for your business.
It’s okay to take the home office deduction.
The home office deduction used to be seen by many people as a red flag that could land you an IRS audit, but that’s not the case! The IRS has actually made it easier to calculate and take this deduction in recent years, so even if you’re a first-time freelancer working mostly from home, the process isn’t complicated. As long as you meet the IRS qualifications for taking the home office deduction, you can proceed and get savings for your work at home.
People who are filing taxes as first-time freelancers have a few key points to learn, but don’t worry about knowing the tax laws. TurboTax will ask you simple questions about you and your business and give you the tax deductions and credits you deserve based on your answers.