All workers have to pay taxes on the income they earn throughout the year. If a worker is a full- or part-time employee, then their employer will deduct taxes automatically from each paycheck, and the employer themselves will also pay payroll taxes on those who work for them. But if you're a freelancer, the responsibility of calculating and paying this amount falls on you. Below are a few tips to help freelancers streamline the filing process.
A Freelancer's Guide to Taxes
1. Maximize Your Deductions
It costs money to run a business, even if you're a sole proprietorship without a designated office space, as most freelancers are. Fortunately, the government recognizes that even the smallest enterprises have overhead costs, and you can deduct most of these from your taxes.
Common expenses include computers and office equipment, supplies, advertising, telephone calls, travel, utilities, meals, and entertainment. If you can prove that the expense is related to the business, you can likely deduct it.
2. Organize & Retain All Receipts
Throughout the year, keep track of all receipts for business-related purchases. This will help you easily identify deductions come the new year. Receipts will also be essential in the event you are audited.
Taxpayers who are audited are usually chosen through random selection. During this process, an IRS representative reviews your taxes and deductions to confirm they are correct. At this point, having receipts ready will provide the necessary evidence to support your deductions.
If keeping track of countless pieces of paper seems overwhelming, download any of the receipt-organization apps that scan, sort, and save them for you.
3. Get Help If You Need It
Unless you're an accountant, taxes can be a confusing subject to navigate, especially for those new to freelancing. To be sure you are in compliance with all applicable laws, reach out to a professional if you need to.
Accountants are there to make the filing experience as smooth and stress-free as possible. They will also ensure you are taking all allowable deductions, and they will offer advice on planning for the coming year's taxes.
If you're a freelancer who needs assistance with your return, Donna Sellers, CPA can help. For over 20 years, she has been serving clients throughout the Brownfield, TX, and Terry County region. She offers comprehensive tax preparation, payroll, and accounting services to area individuals and businesses. Call (806) 637-8556 to schedule an appointment. Learn more about her offerings online.