Dealing with taxes as a freelance worker can be a mess. The complexity of filing your taxes is often similar to running a small business, but you only have one person to do all the work. Here are some tips for simplifying the tax return process as a freelance worker.
Forecasting Your Tax Bill
As a freelancer, you'll have to pay a bit more in taxes to cover your social security costs. If you're not prepared for the extra expense, it can quickly tank a year that you thought was profitable. As you go through the year, consider setting aside self-employment tax in a separate account so that you're not tempted to tap into this money.
Keeping Track of All Earnings
Keeping track of all your income sources is a bit trickier for a freelance worker, since you won't get a neat W-2 for the year that shows all of your earnings. Your clients need to send you a 1099-MISC if they have paid you more than $600 this year, and this can help you to recall and check your major sources of income. However, you also need to claim those smaller clients on your tax return, so be sure that you keep records of all transactions over the year.
Organizing Your Invoices
Tax time can be a nightmare if you have a stack of invoices with different formats. Even if your client wants you to fill out a company-specific invoice, be sure that you also have a format of your own. This way, you can quickly skim the invoice to find the dollar amounts you need. It's helpful to keep all of these invoices separated by month in different folders.
Hiring a Tax Accountant
Tax services are your best friend when it comes to filling out your taxes. An accountant can help you account for all sources of income and all of the regulations you must follow. You also have the option of collecting all of the information on your own and using a tax service to fill out the forms at the end of the year. Tax services not only streamline the filing process, but they can also help you to lower your bill by maximizing your deductions.
There are many benefits to being a freelance worker, but complex taxes are a major drawback. Be sure to get the help that you need to organize your taxes and file them correctly.