Tax season is something that many Americans dread every year. Preparing your tax return can be time consuming and even stressful at times. However, it doesn't have to be. There are plenty of things that you can do to make filing your taxes a little easier. This is true for both freelancers and those who are in permanent positions. Freelancers now make up 34 percent of the US workforce. Whether you are a full time freelancer or part time, you will have to keep a few things in mind when filing your taxes. Here are three things that freelance workers should know about taxes.
Keeping Track of Your Income is Important
The first thing that any freelancer should know is that it is very important to keep track of your income. This may be more difficult than you expect, especially if you have multiple 1099-MISC forms. You are also responsible for the self-employment tax in addition to income tax. The self-employment tax includes Social Security and Medicare taxes. The self employment tax is 15.3 percent and must be accounted for. Keeping careful track of your income will help you determine how much you owe.
You Can Take Deductions
One of the biggest mistakes that freelancers make is not taking advantage of deductions. An estimated 73 percent of freelancers do not take any deductions at all. However, a lot of expenses that you incur as a freelancer are in fact deductible. Some expenses that you may be able to deduct include travel, lodging, home office, equipment, and education. As a freelancer keeping track of expenses that you may be able to deduct is key. Make sure that you save receipts and other paperwork and have a system for organizing these expenses. Being organized can help you save during tax preparation.
Professional Tax Preparation Can Help
Working as a freelancer can make things a little more complicated when it's time to file your taxes. However, a professional who provides tax services can help. They can help you identify which deductions you can take and what works best for your situation. The average cost of hiring a tax professional who itemizes your deductions costs $273. If you don't itemize, the cost averages out to $176. However, for most freelancers, itemizing your deductions can help you save.
Filing taxes as a freelancer can be confusing at times. Keeping track of your income is a must throughout the year since it will give you an idea of how much you will owe come tax season. As a freelancer it's also important to keep track of any possible deductions you can make. Professional tax preparation, such as from Balkcom Pearsall & Parrish CPA's PA, is a good option for many freelancers.