Artisan Blog

Tax Tips for Freelancers in 2016

Wednesday, January 20, 2016

Did you know 38% percent of millennials freelance? That means twenty and thirty-somethings who work differently from their parents, also need to do their taxes in a very different way from their folks.

While freelancing offers flexible work hours, creative opportunities, and a level of independence, it also means having to become your own HR department. Although tax season is several months away, freelancers can start preparing now by organizing expenses, 1099s, and more. Check out these tips and tools to make your 2016 tax season a breeze:

Determine what kind of return you need to file. Are you a freelance business as an LLC, or are you an independent contractor? Or did you work as a W2 with staffing agencies like Artisan Creative? Make sure you find the correct forms to file based on your business, as well as corresponding state and local forms.

$600 or more means you need a 1099. If you earn $600 or more from any one client, you need to report that income on your tax return using a 1099-MISC form. So if a client has yet to send you these forms by February 2, contact them and request one.

You need to pay both income tax and self-employment tax. While this may come as a surprise to freelancers, you are essentially taxed twice -- once as yourself, and once as a 1099 contractor. However, half of your self-employment tax is deductible as a business expense. If you haven’t set aside enough money to cover the cost of your taxes, start saving immediately so you can pay off at least some of your owed taxes. And if you determine you need to make estimated tax payments, make quarterly estimated tax payments on estimated income tax, including estimated self-employment tax.

Research tax breaks. The IRS offers a substantial number of tax breaks, which give freelancers a wonderful chance to get some additional deductions they’ve spent on their business. Deductions change from year to year, so look up common ways to determine your deductible expenses. For example, if you work from home, you can deduct the cost of your Internet bill, as it’s used while you work. Freelancers Union helps sort through this in its in-depth tax blog.

Set reminders. Do not wait until the week before April 15 to file your taxes unless you love stressing yourself out! Use calendars -- from Google to iCal to the Sunrise app and more, there are plenty of online choices to keep track. Set aside enough time to complete a set of tasks, like determining deductions or adding up your total income or expenses from 2015. Filing taxes is a pain, but it’s an even bigger pain to do it under a tight deadline.

Organize receipts and expenses. To help maximize tax deductions and keep the IRS happy, it’s best to stay organized and keep updated records of receipts, expenses, and payments. Have all these things stored and easily accessible to reduce the stress of filing. For instance, if you’re creating a digital archive, Shoeboxed is a great app for storing, processing, and organizing pictures of receipts on your phone.

Get help from a seasoned tax professional. Because tax deductions change so often, it may be best to hire a CPA to help so you can take advantage and save money. NerdWallet is an excellent educational blog to help you make smarter financial decisions, and can tell you which tax breaks you’re qualified for.  Just make sure if you hire a CPA, they are accredited and come recommended. The last thing you want is someone who’s untrustworthy handling your tax information!

Set yourself up for next year’s success. If you find that this year’s filing has been stressful, help take out some of the work for 2017 by setting yourself up to function more as an independent contractor next year. Create a separate bank account for your business to funnel payments through that account as well as pay any business expenses like insurance and tech maintenance through that account. Then use your organization system to keep track of receipts and such, as well as how much you think you’ll need to set aside to pay next year’s taxes.

With these tax tips, your freelance tax season will be the most time-saving -- and money-saving -- one you’ve had yet!


Filing Taxes as a Freelancer: How to Make Your Life Easier

Wednesday, April 15, 2015

Filing Taxes as a Freelancer: How to Make Your Life Easier


Keeping track of your income and every single expense throughout the year can be tricky unless you stay organized. Financial decisions may be daunting, but they don’t have to be when you follow these handy tips to get you through the next fiscal year.

Keep records of clients and payments - If you work with multiple clients over the course of the year, it’s a good idea to keep a list of each client and how much you made while working for them.  There are a number of invoicing programs out there to assist with this such as Harvest, Freckle and MarketCircle.  NOTE: If you go over $600 for any one client, they should send you a 1099 in January.  This list can help you follow up with any late documentation come February or March.

Know your deductions – Expenses can add up, especially if you drive client meetings or deliver work to your clients, keep a record of trips back and forth. You can’t count commuting miles, but if you work offsite, mileage to and from clients can add up to a hefty sum. Client lunches, parking, healthcare, Internet and entertaining all fall under the deductions category.

Create a dedicated office space - You can only take a home office deduction if your space is used exclusively for work. But it doesn’t take a lot of space to count as a home office. Dedicating a small area of your home to work can help with deductions for part of your rent and utilities expenses.

Keep your receipts - Save your receipts and work with a tax professional to help you determine what can actually be written off as part of your business.

Save some money - Depending on your situation - you may end up owing some tax next spring.  You don’t want it to be a surprise. Therefore, it's always best to put a bit of each paycheck into a separate account - just for tax payments in the following year. If you have nothing to pay - you can always give yourself a refund.


Do you have any helpful advice you adhere to each tax season? Share your thoughts in the comments.

 


Managing Finances as a Freelancer: Five Tips to Better Manage Your Income

Wednesday, December 10, 2014

Managing Finances as a Freelancer: Five Tips to Better Manage Your Income

 

As a freelancer, part of your job is to keep on top of your money and your financial plan. Managing finances may not be part of your job description but it’s obviously an important part of leading a successful freelance career. How do you manage your income? Are you leaving it up to a third party or an accountant or perhaps you’re taking each week as it comes? We’ve compiled a list of best practices for you to better manage your income and keep you money in order.

Create a Budget
Make a list of everything you need each month, both business and personal and keep track of what you’re spending. Mint has a great free resource for budgeting and they even send alerts to let you know how you’re doing. Make sure you pay yourself and budget for your own personal allowance. If you have a few months where you come in below your budget, you may need to rethink your freelance strategy or take on more work.

Manage Expenses
Here’s where the bookkeeping comes in. Familiarize yourself with a program to help you track expenses with ease. We recommend QuickBooks or a similar software program -- when it comes to tax season, it makes everything that much quicker. Apps such as DocScanner are a wonderful little tool to upload documents from your phone and help you to de-clutter your office space. Ana Rubio, Artisan’s Financial Controller states, “Tracking income and expenses can also be easily done on a spreadsheet listed by each week so you know where each check is going ahead of time. Keep track of all cash expenditures for a month so you know where your ATM withdrawals are going!”

Save, Save, Save!
You may be working now, but what happens at the end of your current contract? Unless you’re very lucky, there may be gaps between jobs so having some kind of backup emergency fund to keep you going is the key to longevity. Try to have at least a few months of savings based on your monthly budget – by doing this it will mean you can afford to choose the next freelance job that you actually want, not one that you need.

File Your Taxes
Tax season can be a pretty confusing time, especially if you haven’t been too organized throughout the year. It can take hours to file so keep all of your 1099 (for independent contractors) or W2 forms (for temp employees) saved. Clients should send these out by January 31st so start chasing them if you haven’t received yours by February. If you’re able to pay your taxes quarterly, take advantage of being able to pay off small chunks throughout the year to avoid being hit with a big bill when April comes around. If it’s within your budget, hiring an accountant can save you a lot of worry and time but it does come at a price.

Open a Business Account
By keeping personal and business accounts separate, you can avoid overspending and keep track of your income more easily. Pay yourself from your business account to your personal account so you have a dependable and steady income.

What advice would you share with freelancers? Have you learned from any mistakes? Share your thoughts with us on Twitter @ArtisanUpdates.

Laura Pell - Recruiter at Artisan Creative



Search

Recent Posts


Tags


Archive