Many great freelance careers give you the freedom to make your schedule, ensure a fantastic work-life balance, and enable you to be your boss. However, since you’re not working for a company and receive earnings directly from your clients, you need to handle the tricky tax stuff yourself. By now, you know how stressful tax season can be, so consider these tips to successfully file your taxes as a freelancer.
Keep Track Of Your Earnings and Expenses
You won’t want to pour over week after week of invoices and payments when your taxes are due, so keeping a spreadsheet of how much you earned each week or month and who paid the invoice will help you massively when the time comes. Rather than add several payments together, just check the number at the end of the month and add these up to find your total earnings. As for expenses, keep all your receipts (and scan them if necessary) because this will make it easier to deduct business-related payments you’ve made.
Retrieve Your Tax ID Number
You also need your Tax ID number to fill out the forms correctly. Thankfully, this isn’t too complicated, although how long it takes to get an EIN number depends on how you contact them, with phone calls being the fastest method. It is worth getting this number as soon as possible regardless of the method you use, as there could be delays in the tax office, which means you may miss the deadline if you leave it too late.
Collect the Right Forms
Freelancers may require different forms compared to employees of other companies. While this can seem confusing at first, there are two or three you need for certain. These are the 1099, which you need from any clients who paid you for over $600 worth of work throughout the tax year. If you don’t have them, you still need to declare your earnings, so don’t assume that you can get away with keeping these earnings quiet.
Other forms include the 1040 and Schedule C forms. Your 1040 is arguably the most important document you need since that’s where you determine how much you owe. Schedule C covers similar ground and reports your total earnings and losses. There may be variations of the Schedule C form, so it’s worth double-checking which one you need to prevent any issues or delays.
Use Online Services
Although taxes can be, well, taxing, there are services available that can make things simpler and less stressful. Once you have collected everything you need, download tax software to put everything together to ensure you haven’t missed anything or even filled out forms incorrectly. You can purchase software, but you can also access the IRS’ online service for free if you are trying to keep your expenses low, which is a good idea considering you still need to pay your taxes.
Filing taxes can seem overwhelming, but as long as you have everything organized (and keep everything organized), it becomes much simpler. These tips should help you get on top of all your tax needs and responsibilities so filing them when the time comes is straightforward.