Money Saving Tips That Will Help You When Filing Freelance Taxes
Studies have revealed that a large part of the workforce will be freelancers in the future. With freelancing, you have the freedom of working from where and when you want. As a freelancer, you will make more money than having a regular job with a fixed schedule. What may be standing between you and your freelancing job is taxes. You will not find taxes as complex as they seem when you have some knowledge. Money saving tips that will help you when filing freelance taxes have been outlined in this article.
You will be able to save money if you keep track of all sources of income; this is one of the tips. Throughout the year, you may have various clients that you may be working with as a freelancer. When it comes to taxes and freelancing, it is vital for you to monitor all sources of income. Making a spreadsheet will help you to monitor all your clients and your income. The projects due date, invoice sent, expected pay and payment received should be on the columns and each client should have a designated new page on the spreadsheet.
Knowing where the payment process of the projects you have done for various customers are will be possible with this format. You should also make quarterly payments if you want to save money. You may not know how to pay taxes if you are new to freelancing. It is more involving to pay taxes as a freelancer unlike in traditional employment where the employer will deduct the tax from your paycheck. The jobs you will do as a freelancer for your clients will allow you to be paid in full without accounting for taxes.
For this reason, making quarterly payments is an excellent idea. Setting aside taxes, as you get paid, is another money-saving tip to help you when filing freelance taxes. Having a traditional job will make it easy for you to take taxes for granted. Freelancers may fail to plan their taxes properly, and this may cause them to find it hard during certain times of the year. Starting a separate bank account for tax purposes only will help in avoiding such situations. When you are a paid for a project, you can transfer some amount of the money to the separate bank account for taxes so that you will not be tempted to use the money.
You should also not forget about deductions if you want to save money. If you are a freelancer, you will be taxed on your net income minus business deductions. For this reason, you will be taxed less on your income if you have more deductions. If you want to know your actual costs, you should track your expenses and save receipts throughout the year. Some expenses that you may have are office equipment like computer, healthcare expenses and mileage for work-related travel.