Navigating tax time as a freelancer can be a little challenging.
Moving from the employee world of taxes to the self-employed side can be a bit jarring. There are different forms to use, different taxes to pay, different deductions to make, and that’s just the beginning.
Combine that with the complexities of tracking revenue, recording expenses, and maximizing deductions and it’s easy to see how this process becomes so stressful.
Thankfully, though, freelancers can simplify their taxes significantly just by focusing on a few fundamentals.
Tracking Revenue and Expenses
Freelancers that track every penny of their revenue and all freelancer related expenses have a much easier time filing and paying their taxes.
Automated systems that integrate with accounting software and bank accounts simplify things significantly. This information can be used to estimate quarterly tax payments, to project and forecast tax responsibilities, and to set aside money throughout the year to cover tax bills before they are due.
Take advantage of tools to streamline tracking revenue and expenses and most of the headaches caused by freelancer taxes will be eliminated completely.
Freelancers are Responsible for Self-Employment Taxes
Freelancers also need to understand that they are responsible for different kinds of taxes now that they are no longer employees.
While some projects can feel like the 9-to-5 job that caused many to become freelancers in the first place, in the eyes of the IRS freelancers are 100% self-employed – and will be taxed that way, too.
As of 2021, the self-employment tax is 15.5%. Freelancers may be able to leverage different deductions to minimize their self-employment tax responsibility, but they aren’t going to be able to eliminate it completely.
Use Technology to Streamline Filing Your Taxes
Technology isn’t just useful for tracking freelancer revenue and expenses.
There are lots of software options, tools, and online resources designed to help new freelancers and business owners simplify and streamline the tax filing process. These tools are built from the ground up to be used by non-accountants, too. They eliminate a lot of the complexity of the tax filing process without sacrificing usefulness.
Some of these tools are available free of charge, others are available at a premium price point, but all of them are designed to make the tax filing process a little easier to manage.
Best of all, many of these tools and pieces of technology can be written off as freelancer related expenses!
Get professional Help to Handle Taxes for You
Today’s tax software is incredibly impressive.
These tools are better designed and more feature-rich than ever before. They’ve also been engineered to be much easier to use, even without any business financial background whatsoever.
As sophisticated as they are, though, even the best tax filing tools on the market can never replace professional help from professionals specialize in helping freelancers prepare for and file their taxes.
professionals like those at Robert Hall & Associates are able to help freelancers incorporate and structure their businesses correctly, plan their taxes strategically, and protect their business as well as their financial future in ways tax software never could.
For more information about how Robert Hall & Associates can help in the lead up to tax time, with the actual tax filing process, or for professional advice about incorporating a freelancer business correctly, contact their offices directly today.
References
https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-freelancers-guide-to-taxes/L6ACNfKVW
https://resources.banknovo.com/a-freelancers-quick-guide-to-paying-taxes-in-2020/
