Tag Archives: taxes

Should Freelance Writers Choose Cash or Accrual Accounting?

freelance pay issues

by Yolander Prinzel

If you haven’t already, you have a very important choice to make about your business. Eventually, you’ll need to choose whether your business uses the cash or accrual method of accounting. “But wait” you’re thinking, “isn’t accounting, accounting, accounting? What is this cash or accrual method you speaketh of?”

Well my Elizabethan friend, it is basically the timeline in which you choose to report your income. No, that doesn’t mean you can pay taxes on today’s income in five years (wouldn’t that be nice) but it is an extremely important decisions for all businesses, but especially freelancer writers.

When you choose the accrual method, you must pay taxes on money you haven’t collected yet. As soon as you invoice someone, you’ve accrued an income that hasn’t been collected and you must pay tax on that income even if the client stiffs you for 6 months. Anyone who has ever worked for a print publication has probably just broken out into a cold sweat—get your hanky and wipe off that wet, salty fear because I’ve got a solution for you. Continue reading Should Freelance Writers Choose Cash or Accrual Accounting?

Quarterly Tax Tips From Outright.com


From time to time someone offers Freelance-Zone some valuable content that we feel will be helpful to our readers. Kevin Reeth is the CEO at Outright.com, a free online bookkeeping system that helps small businesses keep track of tax info and related material. (Read what PC Magazine has to say about this company here, or just check the company out at their website where there is plenty of information about things such as the security of data and how to get started.)

Since quarterly tax time is approaching, we thought you could use the information Reeth sent over and are printing it for you here. Thank you to Outright.com and Mr. Reeth for the timely information!

(Please note that the facts, thoughts and ideas expressed below are that of Outright.com and not of Freelance-Zone. We are not tax professionals–we’re freelance writers!)

5 Opportunities to Turn Tax Time to Your Favor 

1. Get away with nothing.  If self-employed, you are free from estimated tax payments if what you owe, after subtracting exemptions, deductions, and credits is less than $1,000.

2. A safe harbor during the economic storm. If you choose to pay the same amount as your total tax bill last year, simply pay the same amount on June 15, 2009 as you did June 15, 2008 OR 90% of what you will owe this year.  You can feel confident in what you pay and send your check without further calculation and time spent concerning yourself with the details.

3. Pay it or stay it?  We have had a rocky few months with the stock market.  What are your thoughts on where it will go next?  The IRS doesn’t pay interest on the money you give them now for taxes due later.  Extend those tax expenses and put the money to work for you instead.  Remember! You still owe the money so don’t take risks with it; just consider the tradeoff between what you could earn on it in a safe investment.

4. Credit have you tied up?  The government penalty on underpaid estimated tax payments is down to 4%, the lowest rate we’ve seen in the last 10 years.  Paying down those credit cards, with rates as climbing into the twenties, will likely save you more than the penalty due from underpaid estimated tax payment.

5.  Organize for 2010.  Work with outright.com to keep track of your estimated tax payments; saving the details for next year’s taxes and freeing your time for your business. 

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.

Tax Time Approcheth


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.

Thinking Ahead: Taxes


You can’t start too early. Taxes are a nightmare for the freelance writer. Every year I say I’m going to get things going early. Every year it’s a dash to the finish line. But not this time folks…I’m starting now. I’ll gather my write-offs, get my paperwork in one spot and plan my attack. I’m encouraging you to do the same. Here are a few tips from my own personal experience. Take ’em or leave ’em:

  • Get an accountant. Doing taxes yourself is not a good idea if you are self-employed. You aren’t being frugal–you are playing with fire. A good accountant can help you find deductions you didn’t know you had and advise you for the future. It is worth the money–and it is a write-off anyway.
  • Do a little organization at a time. Collect your 1099’s and put them in an envelope. Make a list of questions that you want to ask your accountant. Chipping away at things really does help.
  • Brush up on information. Surf writer sites and gather information about what the latest write offs are. Even if you have an accountant, you’ll want to know what you can bring in for them to look over. The rules change.
  • Get things in place for 2009. Put a notebook in your car so you can start a mileage log for business trips. Get a ledger to keep track of expenses. Open a business checking account if you don’t already have one. Make things easy for next year!

Freelance Pay and Your 2009 Taxes

calendarMark your calendars, April 15, 2009 is fast approaching. Tax time is hell time for most freelancers, but here’s a little hint that will make tax season 2010 seem like a breeze. Grab your pens, kids, this one’s a real brain tickler.

When you see how much you owe in taxes for 2008, make a mental note. That’s the minimum you should consider spending on your business in legitimate, legal expenses for 2009.

You’re going to earn more freelance money in 2009 than you did in 2008 unless you hit bad luck, give up and go back to your day job or just quit trying. Plan on spending more money on your business this year–what’s the point in giving it over to the government when you can take legit, IRS-approved deductions for upgrading your office, advertising your business or hiring casual labor to take some of the donkey work off your plate?

Why did I choose a 2005 calendar to illustrate this blog post? Because I wound up owing the IRS for my earnings in 2005, and if I had just planned ahead and made some crucial investments in my writing business I could have paid far less while giving my work a much-needed boost with a high-speed Internet connection, a GOOD cell phone instead of the crappy one I had put up with for so long, and several other upgrades.

Be smart in 09. Do the math and plan ahead. Make those purchases and promote your business. You should pay all the taxes you owe–but make damn sure you don’t owe as much as you could when there are legit deductions to be had.