Whether you’re a ride-sharing driver or an IT consultant, freelancing is a popular alternative to the standard office job. However, being your own boss also means taking on the responsibility of tax management. Working in a gig economy requires knowing how much you need to pay in taxes to avoid penalties, so follow these tax planning tips to ensure you remain in compliance. 

How Can You Manage Your Taxes as a Freelancer?

1. Keep Impeccable Receipts

Throughout the year, maintain a file of all the receipts relating to your freelancing projects. These include those for parking and tolls, business meals, airline tickets, hotels, and supplies. When it’s time to file your income tax return, you’ll have all the documents you need to take advantage of money-saving deductions. As a backup, consider creating PDFs of all your receipts. 

2. Make Estimated Payments

If you’re a freelancer who expects to earn more than $1,000 in 2019, you’re required to pay estimated taxes. These payments must be submitted to the IRS each quarter, but calculating how much you owe can be complicated. If you’re unsure about how to proceed, a tax planning professional can help you meet each payment deadline with accurate estimates.

3. Select a Business Structure

There are four common types of business structures: sole proprietor, limited liability corporation, S-corporation, and C-corporation. Each has different factors that affect how much you pay in taxes and whether your personal assets can be seized if you’re sued. Consult with a tax planning agent or business attorney for guidance on which business structure is most beneficial for you.

4. Research Deductions

From having a home office to buying a laptop, there are many money-saving deductions you may be eligible for as a freelancer. Even things like mileage and medical expenses can sometimes be deducted. As previously mentioned, keeping a file of receipts will be very helpful when taking deductions, as you’ll have the documentation to back up your claims. If the IRS sends an audit letter, this proof will be essential.

For over 30 years, Bergamo Tax & Financial Solutions has helped freelancers stay on top of their earnings. Based in Waterbury, CT, this family-owned firm provides professional tax planning services to people throughout Middlebury and Litchfield. You can count on personal attention from this team of experienced accountants. If you’re a freelancer who needs help filing your taxes, call (860) 274-1655 to schedule a consultation. You can also learn more about the agency’s services online.