Tag Archives: freelance taxes

editorial, featured

What You Might Not Know About Self Employment Taxes

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freelance taxesby Joe Wallace

It’s nowhere near April 15th, so why am I writing about tax issues for freelancers now? Because if you track your figures all through the year, you’ll know when you might need to take a deduction or how much to contribute to your SEP IRA by the end of the contribution period to avoid a nasty surprise on your income taxes for next year.

Didn’t know you could do that? Then you probably don’t know about these little issues, either…lucky for you we’re watching your financial back, eh? Don’t take any of this as advice from US, this information comes directly from the IRS official site:

Self-employment taxes break down like this:  self-employed people pay 15.3% until your income pushes you into a higher bracket. The rate is in two parts–you pay 12.4% for social security plus 2.9% for Medicare.

Did you know you can deduct half your self-employment tax for the purpose of figuring your adjusted gross income? But you can ONLY take that deduction from your income tax, not your Self Employed tax. Are you confused yet?

Who pays Self Employment tax? Anybody who earns more than $400 from self employment activities. Also, any church employee who earned more than $108.28 must also pay SE tax.
Continue reading What You Might Not Know About Self Employment Taxes →

editorial, lifestyle

Freelance Writing’s Most Under-Served Issue

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by Joe Wallace

I was chatting with a fellow freelancer about writing blogs and such when the conversation turned towards under-reported, under-represented, and just plain not-much-bothered with topics in the freelance writing blogosphere.

For my friend, it was how to advance to the next level of pay. “I read all the time about these six-figure freelancers, but it’s hard to tell what people do to go from small-time to mid-range pay for their writing.”

To me that one seems pretty simple (not easy) because it’s about setting your rates and not letting yourself be pulled back into your former lower income work, but I can see how a lack of specific details from writers (how I did it-type stuff) would be one of those under-served themes. Continue reading Freelance Writing’s Most Under-Served Issue →

advice

Tax Time Tips

freelance-writing-adviceI don’t give tax advice–I’m not a tax pro nor do I claim to have any real answers on the actual filing of your taxes, but I can give you some advice on things that could get you out of a jam–at least temporarily. One of the worst things that happens to any freelancer before filing taxes is a change of address. You’re sure to lose SOMETHING you need when filing on April 15th, and you’ll never dig it out in time to meet your deadline. You’ll discover a box of missing receipts or other documentation on New Year’s eve next year when you’re searching for party hats.

So what’s a poor freelancer to do when coming up short on those receipts you need to claim your deductions properly?

First thing I do is get in touch with my bank. Anything you’ve charged for business in the last year should show up on your statements unless you paid cash, and who pays cash for business expenses these days? Use the bank statements to prove you made the purchases, and file any required paperwork with the IRS for a missing receipt.

The trick in these cases is to show the IRS you want to follow the rules and take the deductions you’re entitled to. Submit deductions with no paperwork and you risk an audit–it just looks too fishy to claim a sum (especially a triple digit or higher one) with nothing to back it up.

I’ve touched on filing for an extension before, and if you need the extra time to get your paperwork in order, it could really shave a lot of worry off…an extension may be worth it, especially if you know where your receipts are but just have to get to them sooner or later. If you’ve moved cross-country and you are waiting for a shipment or a box that you mailed to yourself on the other end, you know exactly what I mean.

Ever open a box of receipts only to discover that many of them have faded over time? Your best bet is to try the bank again or your credit card company–but don’t delay. You may only have a limited amount of time to get copies of your statements without having to pay for them.

editorial

Tax Time Approcheth

taxes-for-freelancers

I’m so desperate NOT to think about my taxes that I’ve resorted to watching old episodes of Meerkat Manor. Ok, not really. But freelancers have it rough this time of year, and you can’t take your bar tabs as a business expense when you’re drinking to forget about April 15th.

Don’t forget you can file for an extension to get a little more time to deal with that avalanche of receipts and expenses you need to track. If you need more time, you can file IRS Form 4868. There are instructions at the IRS official site, plus a friendly IRS warning–extension time for filing is NOT permission to pay your taxes late. Take the extension if you must but don’t delay in paying your taxes–you’ll regret it.

editorial

10 Questions to Ask Your Freelance Tax Preparer

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freelance-taxesI will NOT give tax advice here, since I’m not a tax professional. No, wait–that’s a lie. I will give ONE bit of tax advice. Don’t do your  freelance taxes yourself!

End of advice.

When I use my tax preparer or CPA, I refuse to simply hand over the paperwork and hope for the best. Some people do this, but I think they cheat themselves.

I ask a lot of questions so I can learn where I went wrong last year, what I did right, and how I can set myself up for next year with a lower tax bill and more of my money in my own bank account rather than AIG’s.

Here’s a list of questions you should ask your tax preparer–and if they don’t feel like answering your pesky questions, you’ve got the wrong tax pro. Move on and find someone willing to help you understand what you need to know. After all, we’re paying THEM, not the other way around.

Here’s a list of top ten things you should grill your tax preparer about:

10. How much can I deduct for my home office and how do I legally justify the deduction?

9. Can I deduct professional purchases like memberships in writer’s guilds, subscriptions to writing magazines, or buying research materials?

8. Under what circumstances could I deduct the cost of DVDs, CDs, and computer software? What do I need to do to be compliant with IRS regulations here?

7.  Should I depreciate my computer purchase over three years or take the whole amount for a single year? What are the advantages to doing it one way or the other?

6. What do I need to do to prove a deduction was business-related?

5. Can I deduct a new car purchase? What if it’s a company vehicle for business use only?

4. What is the difference between a business deduction and a personal deduction for self-employed people? Which should I be trying to take and when is it to my advantage?

3. Can I deduct the full amount of business equipment purchases every year? Or MUST I depreciate at some point?

2. I want to take all the deductions I am entitled to by law, but I don’t want to risk getting into hot water over gray-area deductions. How do I tread this fine line and remain on the good side of the IRS?

1. When the tax preparer has finished preparing your taxes, be sure to ask what you didn’t do well enough this year and how you can handle your finances for the following tax year to legitimately reduce the amount of tax you owe through proper deductions and tax breaks.

advice, lifestyle

Moving, Taxes, and Freelance Writing

moving-truckQuite frankly, moving sucks. It sucks even more for a freelance writer who–I’m talking about ME here–stupidly schedules a move both in the ass end of winter in Chicago AND before tax time. This guarantees that all my vital paperwork will go missing until I have to file an extension with the IRS.

The upside is, in my case, I get a nicer office, a great place to spend the majority of my day, and a sunny front room where I can go to take a break from it all and take in some sunshine before going back to the salt mines.

Here’s the advice every single writer dispenses once they’ve screwed themselves by moving without thinking ahead: Pack all your vital papers, put them aside and keep them close. Don’t let anyone take them out of your sight. You’ll want to drink a bottle of sulphuric acid later if you lose ’em.

Now here’s the advice you WON’T get–the EXCLUSIVE good insider dirt you come to expect from Freelance-Zone.com. Ready? Continue reading Moving, Taxes, and Freelance Writing →