Disclosure: This post was submitted on behalf of PennyMindingMom.com.
As the saying goes, there are only two sure things in life: death and taxes. You may be wondering how to pay taxes as a freelancer.
There are certain things you have to make note of so that you aren’t audited by the government or charged any extra fees. Plus, you want to get the most out of your tax return.
Paying taxes as a freelancer can be fairly stressful because you have more responsibility to keep track of everything. That’s why we’ve taken the important information and boiled it down to the essentials just for you.
Keep reading to learn about 5 tips for staying on top of your freelance taxes.
1. Figure Out What You Must Pay
If you’ve ever wondered how to do taxes as a freelancer, then you should remember to pay your self-employment tax. Although the number can change, this tax is always a combination of your Social Security tax and your Medicare tax.
Additionally, there’s a state self-employment tax that you should be mindful of.
With so many little things to remember, it helps to do basic research into taxes so you can set aside the right amounts.
2. Be Prepared to Pay Quarterly Taxes
Taxes for freelancers usually need to be paid every quarter, rather than every year. If you don’t pay quarterly then you might end up paying a penalty at the end of the year.
This is required if your business is profitable, which is determined by whether or not you earn more than 400 dollars net.
3. Know Your Tax Forms
As a freelancer, you must report your earnings using a Schedule C IRS form.
For clients that pay you over 400 dollars, you should expect to receive from them a 1099-MISC form. Although, if your client pays you using Paypal or a different online payment method, then you will only receive a 1099-K form if they pay you more than 20,000 dollars or more than 200 times in a year.
Regardless of whether you receive a tax form or not, you should always report your earnings to the IRS.
4. Consult an Accountant
Unfortunately, they don’t usually teach kids taxes in the public education system or even in private schools. Luckily, there are people who’ve dedicated their careers to mapping out the labyrinth of the tax world.
If you want to have peace of mind that you’re doing everything absolutely correctly then you should find an accountant to help you.
5. Plan for Retirement
Planning for your retirement can be as stressful as it is complex. One thing’s for sure, we all get old and when that happens, we’ll need savings to fall back on.
When it comes to retirement tax planning, you should let the professionals help you come up with the best plan for your needs.
Ready to Stay On Top of Your Freelance Taxes?
Now that you know about the best ways to stay on top of your freelance taxes, you don’t have to be stressed out during tax season.
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