There are many advantages to branching out on your own and doing some freelancing. Regardless of whether you only have a few hours of side work or have secured enough clients to make a full-time living, though, filing taxes is going to be more complicated than when you were an employee. Here are a few tips all freelancers should keep in mind come tax time.

A Freelancer’s Guide for Filing Taxes

1. Account for the Self-Employment Tax

In general, freelancers end up paying more in taxes than traditional employees. Although they might be able to deduct more significant expenses like a home office or cell phone, they have to cover all their Social Security and Medicare taxes. Employers typically cover half of the former, or 6.2%, while employees cover the other half. Since freelancers are technically self-employed, though, they must pay the full 12.4%. They must also pay 2.9% for Medicare, which means the total self-employment tax is 15.3% (for those who make less than $200,000 annually). 

2. Save Receipts for Everything 

Freelancers can deduct all kinds of expenses when preparing their return every year; however, certain deductions are going to raise red flags for the IRS. For example, while you have every right to claim a home office if you use one to conduct business, doing so may increase the chances of being audited. Therefore, it is essential to save the receipts, records, and invoices for every single expense you plan on deducting at the end of the year. Good records will not prevent an audit, but they will make undergoing one a lot less stressful. 

3. Seek Professional Guidance

Because freelancers may be more likely to be audited, it is wise for them to enlist the help of a CPA when preparing their annual return. Turning to a professional will ensure your paperwork does not contain any costly mistakes. It will also stop you from missing all relevant deductions or claiming ones that do not apply, according to the law. And if you are audited, you will have professional guidance every step of the way. 

Donna Sellers CPA is a knowledgeable accountant in Brownfield, TX, who is proud to help freelancers file their taxes. With more than two decades of experience, she knows what it takes to mitigate potential issues with the IRS, find every relevant deduction, and ultimately secure the highest return possible. Visit her website to learn more about the comprehensive financial services her firm provides. Then call (806) 637-8556 to discuss your needs.