The idea of setting your own work schedule and working where you prefer may seem like the ultimate way to make a living with freedom and mobility. Every work opportunity may have challenges, and this is true even if you work in a freelance format. The steps to a successful freelance experience may be easier than you imagine, and preparing taxes may be the ideal way to help others and earn money on your own terms.
1. Understand how taxes accrue
Paying taxes is different if you work for yourself as opposed to being an employee and receiving a W-2 form from a company. You may receive a 1099-MISC form as a record of your earnings, and this is what you will need to submit when you file your own taxes. Otherwise you need to track your income.
2. Keep a record of your expenses and income
You should think of your freelance work as a business, and this means that you should keep an accurate record of your income and operating expenses. You should keep receipts, invoices, and other pertinent information organized at all times. Keep these documents in a safe file in your office for when you start to prepare your taxes.
3. Make regular, estimated tax payments
Employees can have taxes withheld from their paychecks, but you will have to take the lead in setting aside tax payments if you work freelance. Falling behind can lead to problematic financial circumstances, and you may be faced with penalties if your tax payments fall behind as well. The good news is that you can make online payments, and this can eliminate the burden of having to come up with a large sum of cash when your return is due.
4. Understand your deductions
Business expenses come in many forms, but legitimate deductible expenses are characterized as being necessary and ordinary for the type of business in question. Business expenses may include insurance, rent, advertising, utilities, and personal vehicle usage.
5. Post an earning profit
Posting a loss each year may be cause for the IRS to view your business endeavors as a hobby as opposed to a way to earn income and make a profit. This may lead to costly audits, so you should exercise care as you conduct your freelance work. As long as you produce a good amount of revenue and have separate finances, you should be safe. Check with your tax professional.
Taxes are an annual occurrence, but having a plan can can keep this routine part of earning a living from derailing your dream of working independently. Work with professionals and purchase the tools necessary to keep good records, like Quicken, and prepare good tax documents, possibly H&R Block Business Edition.
Article Source: http://EzineArticles.com/8345265
1. Understand how taxes accrue
Paying taxes is different if you work for yourself as opposed to being an employee and receiving a W-2 form from a company. You may receive a 1099-MISC form as a record of your earnings, and this is what you will need to submit when you file your own taxes. Otherwise you need to track your income.
2. Keep a record of your expenses and income
You should think of your freelance work as a business, and this means that you should keep an accurate record of your income and operating expenses. You should keep receipts, invoices, and other pertinent information organized at all times. Keep these documents in a safe file in your office for when you start to prepare your taxes.
3. Make regular, estimated tax payments
Employees can have taxes withheld from their paychecks, but you will have to take the lead in setting aside tax payments if you work freelance. Falling behind can lead to problematic financial circumstances, and you may be faced with penalties if your tax payments fall behind as well. The good news is that you can make online payments, and this can eliminate the burden of having to come up with a large sum of cash when your return is due.
4. Understand your deductions
Business expenses come in many forms, but legitimate deductible expenses are characterized as being necessary and ordinary for the type of business in question. Business expenses may include insurance, rent, advertising, utilities, and personal vehicle usage.
5. Post an earning profit
Posting a loss each year may be cause for the IRS to view your business endeavors as a hobby as opposed to a way to earn income and make a profit. This may lead to costly audits, so you should exercise care as you conduct your freelance work. As long as you produce a good amount of revenue and have separate finances, you should be safe. Check with your tax professional.
Taxes are an annual occurrence, but having a plan can can keep this routine part of earning a living from derailing your dream of working independently. Work with professionals and purchase the tools necessary to keep good records, like Quicken, and prepare good tax documents, possibly H&R Block Business Edition.
Article Source: http://EzineArticles.com/8345265
