Working as a freelancer might be the dream of many of us. Being your own boss, deciding when, where, and how much you work sounds enticing. Deciding on how much or how little you charge for your work is another advantage, too. However, this professional path also has its downsides. One of them is having to pay freelancer taxes.
When you work as an employee, your employer takes care of almost everything. When we work on our own, the responsibility falls upon ourselves. This is why we bring you a short list of different aspects to consider regarding freelancer taxes. From your quarterly payments to home office and professional help, we hope these tips will be helpful for you.
Pay Your Freelancer Taxes Every Quarter
One of the most important aspects freelancers need to know is that you have to pay your taxes every quarter. Since you don’t have an employer to make these payments, you must submit your Quarterly Estimated Tax payment to the IRS every three months. The due dates may vary a little every year, but for the current tax year, with January 15th, 2020 being the next ones. There are due dates in April, June, and September, too.
You should keep a portion of your payments apart so you’re able to cover this payment. Most tax advisors recommend saving anywhere from 25% to 30% of your payments to cover the quarterly freelancer tax. Employers tend to cover somewhere around half of your corresponding tax payment. Since you are your employer, you have to pay for the whole amount.
Home Office and Other Expenses
When it comes down to the yearly tax return, it might be harder for freelancers to keep an accurate and well-documented record of income and expenses. This can sound obvious for some, but we can highlight enough the importance of keeping track of each and every payment we receive. We should also document every expense that is business-related. From meals and transportation to stationary and any other equipment you need.
Home office expenses are also deductible, so keep that in mind. In order for the home office tax-deductible to be approved though, there are some considerations to have. First, the area should be used as an actual home office. This is a part of your house where you run your business exclusively. Having a clear division between home and office is crucial. If you use a room of your house partially for home office, you should calculate the percentage of business use and personal use.
Hiring a Professional Always Helps
There are many other tips and tricks regarding freelancer taxes that are worth learning. So, we always recommend hiring a professional accountant or tax advisor. This can be especially useful for those who just began their freelancer career. Being aware and knowledgeable of current state requirements and regulations is an essential part of freelancer taxes.
Being your own payroll department might be simple for some. We shouldn’t underestimate the real value a professional consultant can bring. Besides, learning how to take advantage of freelancer tax returns will be beneficial, not only for your pocket but for your business too.