Alright, freelancers, you have a pretty good gig, right? You get to do what you love from blogging, instructing yoga classes, photography, programming, and more from the comfort of any location. Maybe you even got to spend the entire day working hard from the comfort of your pajamas yesterday.
Even though being your own boss comes with freedoms, it doesn’t give you the ability to avoid filing your taxes. As a freelancer, you must your income taxes. As a business owner you still have to pay self-employment taxes too. Luckily, we’re here to guide you through the entire process so you can quickly and easily complete your return without any hassle or confusion.
The Freelancer’s Tax Guide
1. Know Your Income
You have to report all of your income. Keep track of how you get paid, when you get paid, and the amount. We know this can get tricky because you probably receive a lot of different payment methods from cash, checks, online invoices, and more, but it’s important to keep detailed records for reporting purposes and in the event of an audit.
As an employee of a traditional company, you would receive a W-2 with your reported income, but as a freelancer get used to receiving numerous 1099-MISC Forms from your employeers, which report payments for services performed for a business by people not treated as its employees. With ExpressTaxFilings you can easily handle all of your Form 1099-MISC needs online.
2. Calculate The Amount Of Taxes You’ll Owe
When you’re an employee taxes are withheld from your paycheck. The government holds on to a little money from each paycheck and at the end of the year if they held too much they refund it to you. However, as a freelancer, you will need to withhold that amount yourself.
When you get paid remember that you don’t get 100% of that profit, and budget the amount of taxable income you’ll owe. In addition to income taxes, you will owe the self-employment tax which is basically the Social Security and Medicare taxes which are taken out of traditional employee’s paychecks.
3. Take Advantage of Your Deductions
One of the largest mistakes made when filing taxes is overpaying due to failing to take advantage of tax deductions. As a freelancer, you may have tons of deductions available to you. For example, if you have a home office, such as a portion of your home used exclusively for your work, you can deduct it.
Also, as a photographer traveling to a wedding for work you can deduct to cost of travel and lodging, as well as up to 50% for entertainment and meals. However, don’t think that this gives you a free pass to just start deducting everything. You must provide proof that the expenses were necessary for your business. One easy way to do this is to keep up with all of your receipts, dates, and reasons why they were business-related expenses.
4. Use ExpressTaxFilings If You Employ Freelancers
Businesses there’s no need to stress about reporting wages paid to your freelancers when we’re here to help. Refer to ExpressTaxFilings for all of your 1099-MISC needs. The e-filing process is incredibly easy. Simply follow the guided steps.
All you have to do is create your free ExpressTaxFilings account, select “Create New 1099-MISC Form”, enter the payer details (Name, END, and Address) and the recipient details (Name, SSN/EIN, Address), and enter the federal detail for miscellaneous income.
Then you will enter your state information and taxes withheld from each applicable state, chose if you would like the form to be mailed to your recipient, review the form, pay for it, and transmit it directly to the IRS.
Taxes can be confusing, but the US-based, dedicated ExpressTaxFilings support team is here to make sure that they’re not. Please don’t hesitate to contact us with any questions that you may have. We’re available over the phone Monday – Friday from 9 AM to 6 PM EST at 704.684.4751. We also offer live chat and you can take advantage of our 24.7 email support at firstname.lastname@example.org.