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.