Finding out what the government expects you to pay them is one of the least enjoyable aspects of self-employment. If you work freelance full-time, then it’s a worthwhile price to pay for the freedom that comes with making your own hours and choosing your own clients, and if you work freelance for supplemental income, then you’re only paying taxes on your “extra” money, but that doesn’t make the process any more fun.
It’s a tedious, groan-generating process, but here are some tips to make the whole process a bit easier:
Put some tax money aside throughout the year
It’s a lot easier to find that forty, fifty dollars a week to put aside than it is to scrape together a couple grand in April. Of course, it may be a little late for that, right?
You might not have the money to pay your taxes right now, but you should still take the time to file. You may be able to work out a payment plan, and if you are a few years into not paying your taxes, you may be able to settle for a percentage of the total amount owed, but you’re going to have a hard time getting away with neglecting the process entirely.
Deduct, deduct, deduct!
The bad news: independent contractors pay higher taxes than salaried employees. The good news: you can deduct darn near anything. All of the supplies and fixtures in your home office, from your desk and your laptop to your coffee machine and the time you paid a delivery service to bring you your lunch because you were busy working. The IRS has some handy info on what you can deduct, and how to deduct it. Save your receipts, folks!
File the right form
If you have established an LLC or work independently, report with form 1040. If your freelance business is classified as a multiple-member LLC, use form 1065. Partnerships file with form 1120, and corporations with form 1120S. You can gather these and requisite local and state forms at just about any local government building or get them delivered to your mailbox.
Don’t be afraid to ask for help
Figuring out your tax forms is like solving a Rubrik’s Cube. Your best bet: a generous friend who knows a little something about taxes and doesn’t mind working for pizza and beer (hey, there’s another business expense right there!). Professional help can go up to $500 or more for 1120’s. The good news is that if the job is complicated enough to justify that fee. If you work freelance jobs part-time, you should be able to figure it out without professional help if you only…
Set aside some time
Set aside a free weekend to do your taxes. It’s probably not an afternoon project, and it will be a lot less stressful when you know that you have a couple of days free in which to sort through it.
Gilbert S is a freelance writer from New Mexico, where they don’t pay sales tax on food!