Tag Archives: freelance taxes

Making Your Freelance Business Pay…Literally

This post is sponsored by Outright — Your Livelihood, Right Now.  Getting your taxes right with free bookkeeping.

There are plenty of ways to handle your freelance income, but once you start getting out of the 30K range it might be time to start thinking seriously about structuring your cash flow more like a business rather than as something you earn as an individual. One of the oldest maxims in the freelance book is to treat your freelance business AS a business; paying yourself a salary is a very good step in that direction.

Once you start making this kind of money as a freelancer, chances are you’re already being tempted to incorporate or set up an LLC–if you’re thinking along these lines it’s even more important to consider giving yourself a set salary even–if you haven’t drawn up the paperwork for the LLC or S-Corp.

There are two good reasons to do this, aside from goal setting and keeping yourself motivated. For starters, you’ll have a much cleaner paper trail between your business expenses, your pay, and other deductions. Anything you do that makes it clear to the IRS exactly how and where you paid expenses for your business is a good thing.


The second reason to pay yourself a salary even before you file your LLC or S-Corp papers? Discipline. Depending on which formal, legal arrangement you choose you may be required by law to pay a salary to yourself. S-Corp filers have a whole set of payroll concerns to deal with and while we won’t argue the merits of choosing an LLC over an S-Corp (or vice-versa) here, suffice it to say that getting in the habit of paying yourself as an employee is definitely a good thing if you want to go the S-Corp route.

Giving yourself a set paycheck also allows you to properly budget for the future. How much are you able to dedicate towards other tax-deductible expenses such as travel, equipment replacement, and insurance? Without a fixed paycheck to factor into your budget, deciding on those amounts may be more like guesswork than careful planning–and no serious business survives long on guessing.

This post on the business of freelancing is sponsored by Outright — Your Livelihood, Right Now.  Getting your taxes right with free bookkeeping.

The Most Important Resource You’ll Need For April 15

freelance taxes

This post is sponsored by FiledBy – where authors can claim their free website and build their online marketing platform.

Tax time is right around the corner, and if you’re anything like us, you’re still trying to assemble your paperwork and get your financial house in order to make this year’s freelance tax filing ordeal work as painlessly (hah) as possible. That’s why we direct you to the most important source of wisdom for 2009 taxes ever--the IRS official site itself.

Freelancers, do not be afraid to learn the arcane rules governing self-employed filers. Husband and wife freelance teams, do you know whether you must file as a partnership or as a sole proprietorship? What about knowing the difference between an employee and an independent contractor?


The IRS small business/self-employed FAQ section answers these questions and many more. If you’re still scratching your head over issues such as your limits for deductible meals during business travel such as your travel writing trips or a weekend outing for a writing conference, this site is definitely one you need to know well.

The IRS has a reputation for being mysterious, unreasonable, and downright Byzantine in its rules and regulations that govern our work; I suggest that it’s a simple lack of knowledge in some cases that trips up the up and coming freelancer. It’s not so hard to grasp, for example, that you can create a small company without a tax ID number—if you have no employees, excise or pension plan tax returns, you can use your Social Security number instead. It’s there in black and white, all you have to do is look it up. And that’s the way much of the information for self-employed people is presented on the IRS official site–simple English.

Don’t be intimidated by what you think you know about the IRS. Read the rules for yourself and then decide if you still need to pay a tax pro to help sort you out. You might be surprised at how quickly you grasp some of the finer points. Don’t hesitate to go to the tax professionals if you feel in over your head–but at least give yourself a chance to become familiar with the rules first.

This freelance resources post is sponsored by FiledBy – where authors can claim their free website and build their online marketing platform.

Freelance Tax Time

taxes-for-freelancersby Joe Wallace

I’m not going to be one of those sissy bloggers who says, “This is not tax advice.” This IS tax advice. It’s the best tax advice you’ll ever get. It’s two little words with a universe of implications.

File early.

One year, I  had to file late. Because I filed late, I didn’t learn until it was too late that I needed one more deduction–a big one–to keep me out of hock with the IRS. I could have contributed a nice large chunk to my IRA and avoided owing the same amount. I would have owed something, to be sure, but not the large sum I wound up having to pay.

Continue reading Freelance Tax Time

Tax Advice for 2009 Freelancer Income


by Joe Wallace

Most freelance blogs preface any post about taxes by saying, “This is not tax advice. Consult a tax pro for advice on filing your taxes.” Well, I’m through with all that–at least for this post. I’m going to flat out dispense some tax advice here and boy, is it some sound advice. (Nice ego, eh?)

This advice isn’t really that radical, but it can spare you plenty of grief come April 15th–especially if you’ve made too much money in 2009 and need some last-minute help offsetting a big tax bill.

Here’s my tax advice: Gather up all your receipts this weekend or next, figure out your expenses for the year and measure them against your income. Yes–I’m suggesting you do a dry run on figuring out your 2009 taxes to see how much you owe. Continue reading Tax Advice for 2009 Freelancer Income

Is That a Mutual Fund in Your IRA, or Are You Just Happy to See Me?

question by -bast-

by Yolander Prinzel

Everyone knows they need some type of retirement savings account and, as a business owner, one of your best options is a SEP IRA. Unfortunately, many people think that when you put money an IRA you are buying an investment. An IRA is just a type of brokerage account that holds assets for you on a tax-deferred basis. It is not an investment itself. That means you must use the contributions you make to your IRA to buy things like:



Mutual Funds



Bond Funds


Almost anything you can put into a regular brokerage account. One thing you can’t put into an IRA is life insurance.

The next logical question is: What SHOULD I put in my IRA account?

Unfortunately, my crystal ball is at the cleaners so I can’t actually tell you what to put in your IRA and I can’t give you advice anyway because I don’t know you. Your age, financial situation and aversion to risk are all determining factors in whether you choose to fill your IRA with CDs, money market funds and low-risk mutual funds (that scenario would be good for someone over 50 who is risk averse) or with penny stocks, high-risk mutual funds and REITS (younger person, no aversion to risk—although, I think penny stocks are bad business unless you can afford to throw the money away). You really have to deal with your financial planner on these issues.

One bit of wisdom I will give is that, in 2007, before the economy took a rancid, stinking dump, most of the clients I worked with at Raymond James were comfortable with very high-risk portfolios. When everything started falling apart in 2008 and they were losing 30% or more of the value in their portfolios, they suddenly became risk averse. That isn’t really the way this should work. If you are comfortable with risk, you keep buying when the market is down (part of a strategy known as dollar cost averaging). If you suddenly become afraid of losing money when it looks like you actually might then you aren’t new to a fear of risk, you were just ignoring the risks you faced all along.

Yolander Prinzel, ACS is a financial writer as well as a series 7, 66 and 2-15 licensed financial representative with a decade of industry experience. She was the National Director of Marketing and the Director of Operations for The Compass Agency USA and has also been a trader for Raymond James Financial Services. None of her posts are meant to be advisory. Only an advisor with close, personal knowledge of your financial situation can offer advice. You can get her new e-book You’ve Found Your Specialty–Now What? Tips and Tricks to Finding and Scoring Clients and Making a Living Writing What You Know here for just $7.95.

Freelancers, If I had My Hands in Your Pockets, These are the Things I’d Do


by Yolander Prinzel

Sorry to get your hopes up, but this is not a dirty post. Oh that it were. Unless, of course, you consider money dirty. The purpose of this post is to tell you exactly how I would set up your finances if I could.

To some of you, my methods will look extreme. “Oh Yolander,” you’ll cry, “can’t we just use one account for spending, saving and bills?” No, no you can not. Okay, maybe some of you are up for that responsibility, but a lot of you probably aren’t. For many of you, I would even venture a guess that when you see a large balance in your checking account, you feel safer spending money–even though most of that balance is money you need to send to the IRS in 2 weeks. To change your relationship with money, spending and saving, I suggest the following.

Savings Accounts

I believe in multi-tiered savings. I think that you should have:

1. An intermediary savings to bridge the gap between bills that are due and invoices that are late or to help out in slow months.

2. A business savings for taxes and other potential business expenses.

3. A long-term savings account with funds in CD or bond ladders (a ladder means that there are multiple CDs or bonds in your account with different maturities so that you aren’t putting all your money in a 10 year bond. You’ll have some that mature in 1 year, some in 3-5 and some in 10. That reduces your interest rate and penalty risks.)

4.  A brokerage account with a mildly aggressive portfolio for you young uns and a more conservative blend for people in their 40’s and up. The brokerage account can be funded with extra money or some of your long-term savings.


Checking Accounts

I also like different checking accounts for different uses.

1. A bill paying account. This account should be linked to your intermediary savings account and should be used for bill paying only.

2. A spending account. This is where your grocery money, gas money, and entertainment money goes. This is the only account you use for spending and should not be connected with any saving’s accounts.

3. A business checking account for business expenses and to deposit payments.

Now What?

Remember this post about where to put your money? Here I’m going to give you a road map to follow [click for a larger image (I’m aware of the spelling mistake(s) in the chart but it was too hard to put it up–I’m not fixing it)]:

fzone 1

Yolander Prinzel, ACS is a financial writer as well as a series 7, 66 and 2-15 licensed financial representative. With a decade of financial industry experience, she was the National Director of Marketing and the Director of Operations for The Compass Agency USA and has also been a trader for Raymond James Financial Services and a life insurance underwriter. No matter what you may think, none of her posts are advisory, they are simply informational. Only an advisor with close, personal knowledge of your financial situation can offer advice.