Taxes Aren’t Scary

I’m happy to announce that you still have 27 whole days to do your taxes!  YAY!

As a freelancer, my days leading up to tax day usually involve a lot of deep sighing.  This year I was reminded that the process doesn’t have to be a gigantic pain in the ass.   I thought I would share what’s gradually made it all easier.

1.  Getting help: I did my own taxes with Turbo Tax for five years, and I was always stressed about taking the wrong deduction or mis-entering information.  Yes, these programs are really easy to use.  BUT, if you’re like me and have 2-3 W-2 forms and another 4-6 1099 forms, and share joint finances with another self-employed person, you might want some help.  Last year I discovered Fox Tax, a Twin Cities tax company that specializes in working with artists.  Our accountant Paul is so nice, has incredibly reasonable rates, and gives really good advice.  I also like him because he doesn’t condescend.

2.  Finding a system:  I’m in the process of re-teaching myself Quick Books (I did some bookkeeping work for my parents long ago), but for now I rely on three things: a envelope for receipts, a day planner that keeps track of my business activity (meetings, substitute teaching gigs, car millage), and a Word document where I try to remember to take note of any additional significant business transactions.  Remember: I am a freelancer who doesn’t make all of my income freelancing, so I’ve been able to get by with systems like these.  Ben has more detailed systems.  Bottom line: figure out what works for you.  Fox Tax has tax organizers on their website.

3.  Figuring out what I can write off:  I legitimately write off dance classes I take, performances I see, and meals I buy my cast members when we meet.  I write off millage, equipment, studio space, music I use for shows, props, office supplies, costumes, my health insurance, and part of my phone and computer.  Look at what you use.  Learn what the write-offs are.  I like this Mashable article on common write-offs for the self-employed.

4.  Knowing the rules:  The IRS wants to see that your freelancing is not a hobby-in-disguise.  They want to see growth, and that your business isn’t consistently taking a loss (making less than you spend to keep it going– although sometimes that is legitimately the case).   There are legitimate write-offs (yay!  I have lots of them!), and then there’s the less-than-legitimate, I just don’t want to pay up write-offs (I’ve been tempted).  When in doubt, ask.

5.  Knowing when to pay quarterly:  I’ve always had at least one part-time W-2 job that I have taxes withheld for, which helps balance the untaxed income I have.  Ben started working for himself full-time last year, and about halfway through the year he realized he should have a sit-down with a tax person to talk through paying quarterly estimated taxes.  That move prevented us from owing a lot of money come tax day.  So, if all of your income is untaxed, you should probably make some plans!

6.  Improving my system: Each year, I usually figure out at least one new shortcut to the tax process.  Only recently, I realized that I don’t have to take the time to organize my receipts by month.  Do you know how much time I was wasting?  So. Much.

Freelancers: what else have you found helpful?

Also: Guess what?  I’m not a tax expert!  Please consult a professional and remember that this is just my personal experience and advice.  

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