How to Manage Taxes as a Freelancer

According to business analysts, the home-based business trend is on the rise and a lot of people are jumping onto self-employment. The news is not surprising since there are many advantages in being self-employed and owning your own business. Aside from the fact that you can actually call something your own, there is also the sense of achievement brought by personal success. On the practical side, you get to be your own boss, which means that you decide your hours and how much effort you'll put into a project. Plus, there are certain advantages exclusive to dealing with self employed tax, sole proprietor tax, business tax, and other monetary matters.

Managing your taxes is as a freelancer can be challenging. When it comes to preparing for taxes organization is key. I suggest filing appointment books, daily planners, or calendars with finance materials like taxes and banking records. Your schedule can be used as proofs to verify and clarify business expenditures like travel mileage, phone bills, and hotel receipts. Presto, instant tax deductions. It's also important to log in your travel time and miles driven in business trips in your appointment book. Aside from this, it's important to take note of financial details. Often, these are the causes of tax troubles. Record those bank account deposits, regardless whether they are loans, gifts or business-related. It is also helpful if you note deposit sources. Keep these notes in a checkbook or a separate file. This way, you can separate business income from loans and gifts which aren't covered by tax. The IRS usually assumes undeclared income if audits reported an income excess even if these came as gifts. Proofs or records of these gifts prevent tax problems from the IRS. Even if you believe you have perfect memory,  trying to recall everything related to your finances come tax time is unrealistic.

Self employed tax, sole proprietor tax, business tax, and independent taxes benefit greatly from separating business accounts from personal accounts. Freelaners need to keep business money in a separate account and your own money in your own account. Be reminded to write checks for business purposes from the assigned account and vice versa. For those who don't want separate accounts, note each check with remarks such as "business" or "personal" each time you write one. Identifying the purpose of the check won't hurt either such as "for office furniture". This tip minimizes mix-up of your personal and business finances. Following this tip, keeping credit cards for personal and business use separately is also preferred. As much as you can, keep credit card and sales receipts. There are apps such as Quickbooks and CamScanner which allow you to take photos of your receipts. These are especially handy during audits for reference. Consulting tax specialists, professional tax managers, CPAs, and the internet for tax managing tips are also advised.

Lastly, whether you pay self employed tax, sole proprietor tax, business tax or freelance taxes, keep your records clean and straight. Remember also to settle your taxes on time. Racing after deadlines can make you forget key documents which might cause tax problems.

Michel Valbrun is a Certified Public Accountant based out of Atlanta, Georgia. Michel specializes in Accounting, Tax Planning, and Advisory services. If you want to learn more about Michel, check out his About page.

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