Tax Preparation Tips For Freelance Writers
If you just started freelancing this year and will make over $400, you will need to include this income on your taxes. A freelance writer is typically considered an independent contractor, which means the companies or people you write for will not take taxes out of your income. You will be responsible for your taxes, but you might be able to improve your income by learning how to write off the expenses you have. Here are several things you should know that relate to tax planning if you are working as a freelancer.
You Will Need To Report All Your Income
With freelance writing, you will probably receive 1099 forms at the end of the year that state the income you have earned from the companies you write for. You must include all of this income on your taxes, and you will need to include income that was not included on any 1099s. If you work for a company and earn less than $600 from that company, they will not send you a 1099; however, you will still need to report your income. The IRS calculates taxes based on income, and you must pay your share of taxes if you are earning money.
You Can Write Off Expenses That Relate To Your Job
Working as a freelancer means you are self-employed. You actually own a company that generates revenue, and any company that generates revenue will typically also have expenses. Expenses are a normal part of every business, and the IRS will allow you to write them off, because they relate to your business. Without paying the expenses you have accumulated throughout the year, you would not have been able to make money through your freelancing.
You Should Keep Good Records And Hire A Tax Expert For Help
Keeping track of all your income and expenses will make tax preparation a lot easier. To do this, you may want to create a couple of spreadsheets. The first one can be for your income. Each time you are paid from a company, you should input it on your spreadsheet. For each entry, you should include the date you were paid, the company that paid you, and the amount you received. At the end of the year, you will be able to print off the spreadsheet, and it will show you exactly how much revenue you had during the year.
You should do the same thing with your expenses. Each time you pay a bill that relates to your work, you should input it on the spreadsheet. This can include any type of expense that directly relates to your job. For example, if you purchase a new computer to use for your work, you should write this on the spreadsheet. You can also include office supplies and furniture, Internet service bills, and gas for traveling. A tax expert can help you find other types of expenses to write off too.
You May Want To Pay Estimated Quarterly Taxes
Finally, you should realize that if you do not pay taxes all year long, you may accumulate a large tax debt that must be paid by April 15. To avoid having a huge bill, you should set aside a portion of your income each month to use for taxes. Better yet, you could send in quarterly tax payments to the IRS to offset the balance you will have at the end of the year.
Working from home as a freelance writer can be a great way to make money; however, you should understand and prepare for the tax liabilities this can create. If you would like help planning for your taxes, hire a company that offers tax preparation services or visit a website like http://www.cpa-winterhaven.com today.