Freelancers and Taxes

R

revolution summer

Member
For the first time in my life I will be freelancing and I don't know where to begin with taxes. Are there any good resources out there that explain how to get started so that I don't get screwed when April rolls around in next year?
 
mcgeedigital said:
set aside a good 40% of your pay for taxes.
Click to expand...

Hmmm...40% seems really steep. I've been doing 15% and still getting a 'refund.'

Anyway, for the first two years that I freelance'd, I didn't have Quickbooks. I managed to get by by keeping lots of records, and keeping them organized in a sensible manner. You BASICALLY just need to keep of how much money you're brining in that is NOT taxed; and also keep track of your expenses (gear, rent, subcontractors, office supplies, etc), and also keep track of your miles.

I started a new checking account for my business when I started, and it made life a LOT easier. I made sure that any money coming in or going out went through that checking account. Kept my receipts for business expenses, and I also kept a log of all the miles that I drove for business. Then when it came time to start working on taxes, I got the Schedule C form from the IRS site and saw how the IRS wants your expenses to be divided. So, then I organized all of my expense receipts according to those divisions. For instance, my advertising expenses went into one envelope; insurance receipts went into another; meals and entertainment receipts went into another.

If you have records of all of your income, organized expenses, and mileage, you've basically got all that you need to fill out the Schedule C.

Having said that, I highly recommend that you restrict yourself to keeping the records, and giving those records to an accountant and having him prepare your taxes. My accountant charges me $200 to do ALL of my taxes...it's not expensive. And you are at a much lower risk of being audited if your taxes are prepared by a CPA. Ask around and see if you can find a recommended tax pro and go meet with him or her to get more specifics on how to best keep track of all of this stuff. Taking the time to stay organized along the way will make for a much lower stress level come tax time next year.
 
40% seems steep?
lol
yes, uncle sam is lubeless.
as said, you'll need a good cpa you trust. I hand em invoices and reciepts and let em do their thing.
 
If you want to do it yourself then Quickbooks is the way to go. I go with the CPA I hate doing taxes. Grinner is right (lubeless).... fear the IRS
 
The best decision I have made in the last year of freelancing is going with a CPA both for taxes and payroll. Sure I pay a little extra but the $60 per month for payroll is far better than the hours it would take me to deal with it. And then when tax time rolls around, he's already got most of the paper word done.
 
Not that there aren't enough good reasons to use a CPA already - but a major one is the fact that self employed people who use CPA's are much less likely to be audited.
As everyone else said... fear the IRS.. .and get a CPA.
 
Definitely go with a CPA.

40% is pretty high... unless you are really banking some money you'll more likely to pay somewhere around 20% - 25%

I keep a really good records of all my expenses and cost. I usually take out 20% of my payment and put it into a separate account as savings. Typically because i have a lot of expenses throughout the year, that 20% is enough to cover the taxes i own.

Another good reason to get a CPA is that they know what legally you can write off. As an independent contractor there are A LOT of things you can write off that you may not think of right off the bat. Also as luis said, you are less likely to get audited.

my CPA charges by the hour, but typically since I'm really organized i finish my taxes with him in less then 2 hours. It cost more then if you went to H&R block but well worth it.
 
Consider this though- if you set aside 40% and end up paying 30% theres a nice little equipment and advertising kitty for the beginning of next fiscal year.

I'm all for putting away more than you need to.
 
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