According to a Washington Post article, around 73.2 percent of the individuals who filed taxes last year were privileged to enjoy a tax refund, meaning nearly 96 million people got a refund from Uncle Sam. Of course, as an independent contractor, you might wonder what the term “tax refund” even means because it’s been so long since you have seen one. Sure, you can pay over on your quarterly taxes or have a greater amount of wages held from a spouse to offset the taxes owed by what you bring in as a freelance writer and get some return. However, it’s more likely than not that you will owe something come April 15, 2020. Sure, that date might seem a bit in the future, but planning ahead is key if you are to offset your tax burden. Read on to learn more about independent contractor taxes and what you need to know to save some more of your hard-earned money:
We Are Independent Contractors
WriterAccess classifies us freelancers as Independent Contractors. This means, though they pay us to do a job, they are not technically our employer. As such, this they do not carry any of the tax burden that comes along with being an employer. Consequently, or unfortunately, that burden is then passed on to us as writers. This is a fair system and don’t misunderstand my explanation for complaining. It’s just important for any writer working as a freelancer to understand this fact and prepare ahead of time for the tax hit. My first year as a freelancer, I had no idea what was coming. I got the 1099 form from the company I was working with and my poor husband tried his best to make sense of how to file our joint married taxes, including a form of income we had never previously experienced. Thankfully, I have since learned a few tricks to reduce my tax burden, along with learning the importance of paying my quarterly taxes. (lesson learned the first time I didn’t do that). Keep scrolling to learn more:
How to Prepare For Tax Season as an Independent Contractor
Find a Good Tax Preparer/Accountant
For the first two years as a freelancer, we attempted to do our own taxes from home. The third year, which included the roll out of Obamacare, left us woefully in over our heads. (For those of you who are tax experts here, hats off to you) Eventually, we found an awesome accountant who is amazingly gifted at finding us any and all applicable deductions. He also prepares my quarterly payment statements ahead of time, and figures the exact amount I should send in for each quarterly payment. He even gives me payment envelopes. The amount I pay quarterly is based on my previous year’s income. It also allows for a bit of grace in case I was fortunate enough to make more than the previous year.
Record All Expenses
Any expense directly related to your work is likely deductible. My accountant counts my internet bill as an applicable expense, because I cannot do my job without internet access. I also count a portion of my cell phone bill. I am able to do this because I often access the WriterAccess platform from my phone to grab jobs or message clients while I am away from my computer. Whatever the expense, whether it be mileage to and from a location if you are working for a private client or the amount you pay for a certain bill related to your ability to do your job, you must keep good records. At the end of the year, you won’t remember what you spent on what. Write it down, save it as you go. Start an Excel page just for that and add to it periodically, create a folder for your work expenses, do whatever works for you, just keep up with expenses in some form.
As an independent contractor, you are afforded some benefits taxwise. For example, you can likely deduct the cost of your health expenses, health insurance and other dental costs. Ask your accountant about any and all applicable deductions. If you find a skilled accountant, they will be able to find the deductions that are there, while still following the law. I deduct medical and dental expenses each year and that helps a great deal in terms of what I owe. There is even a deduction for home office that benefits freelancers who work from home. It gives you an off the top deduction of your taxable income of a set amount. My accountant figures that amount, so I am not sure exactly what it is, but any accountant should know about the deduction. The fact that my accountant can find deductions and identify expenses makes paying him to do our taxes well worth the investment. We come out ahead for sure. Of course, if you are tax savvy, you might want to tackle it yourself. Just educate yourself on all possible deductions because you will be your own advocate.
Taxes can sometimes be confusing and are always frustrating to pay. However, by following the tips listed above, you will ensure you are ready for tax season this time around. Contact WriterAccess to learn more about freelance writing and becoming an independent contractor with this awesome company.
Brandie P. has worked with numerous clients to write thought provoking, informative marketing content. Some of these pieces were geared towards small business owners, some were focused on large companies and still others were about marketing strategies in general. In addition to this, Brandie has also worked one-on-one with an architecture office in her area to create content for marketing purposes. Brandie’s experience spans a wide range of businesses and her clients have come from all over the world.