It's the least favorite time of the year
Yay.... tax season! And 3 things I do to make my life easier for it.
I don’t know about you, but I know a lot of freelancers—myself included—bemoan the beginning of February.
The deadline will have passed for clients to send me a 1099 for any contract work that would have paid out last year, which means it’s really time for me to chase down anyone who’s late, and for me to get all my paperwork ready for taxes. (And because for the last five years, I own multiple businesses, I’ve just had… more paperwork. ¯\_(ツ)_/¯)
Whether it’s your first year filing taxes as a freelancer, or your 20th, it’s rarely a straightforward thing to do. Over the years at The Writers’ Co-op, we’ve developed a bunch of resources, now in our archives, on how to set yourself up for success during tax season.
Learn how to navigate taxes as a freelancer: If navigating the world of 1099s, W2s, quarterly taxes, deductions, and business banking account are new concepts to you, you’ll want to tune in for this fundamental webinar on how to best approach your freelance earnings and taxes.
Retirement & investing for freelancers: Contributing to your retirement fund during tax season is a great way to lower your tax deductible income. Future you will thank past you!
Financial management for freelancers Learn how to strategically grow your wealth as an independent worker. It’s possible!
Here’s three things I do during the year and during tax season so I hate it less
Move the majority of my earnings into a high-yield savings account during the year. If you don’t currently have a high-yield savings account (HYSA), I’d strongly urge you to consider it. While you might be able to earn some interest on business checking accounts, the interest rate on HYSA is often much, much higher. I tend to put a chunk of my earnings into a HYSA so it can accrue interest (usually a few thousand bucks a year!) so when I use money to pay my taxes, a bank would have done some of the work for me.
Deductions. These are things I pay special attention to, usually at the start of the new year, because all my purchases for the previous year will be complete. I like taking advantage of the first quiet few weeks to organize my spendings according to the IRS’s Schedule C format, so when I pass all this info along to my accountant, they would do very minimal work thereafter. (Check out the first webinar mentioned above for more info on what freelancers are able to deduct!)
Try and max out your tax-deductible retirement accounts. Freelancers can set up a Roth-IRA or SEP-IRA so you’re able to put your earnings towards your retirement. There’s a household income limit on a Roth, and if you’re earning a pretty comfortable income, you may consider setting up a SEP so you can contribute a higher percentage of your earnings. More on retirement and investing here.
Good luck! And just remember… tax season ends… eventually :)
Wudan