When you decide to strike out on your own and start working freelance rather than working as an employee of a company, you have a great deal of freedom as well as increased opportunities for finding work that you love and connect with. However, at the same time, you will also likely find yourself faced with an unfamiliar situation. You will need to keep track of and manage the full extent of your federal and state taxes. In order to ensure that you handle this situation in the best way possible, get to know a few tax tips that can and will help you to prepare for your first year of freelance taxes.
Keep Detailed Records of Your Income and Expenses
It is extremely important as a freelancer to keep highly detailed records of both your income and your expenses. Every cent that clients pay you for your work and every piece of paper or gallon of gas that you use in the name of your freelance business should be recorded and documented.
It will be helpful and valuable to your freelance business and your peace of mind to keep duplicate records of all of these expenses and your income. This means that you will keep paper records and digital ones of your documents. Keep them in different places in your home or office. That way, if your computer suddenly crashes, or there is a fire in your home, you will still have all of your records.
If you also want to add an additional level of protection with your digital records, you can opt for a cloud storage backup as well. That way, you will never have to worry about losing your tax records if you do lose your physical property for any reason.
At Least for the First Year, Work with an Accountant and Tax Preparation Specialist
In addition to keeping those extremely detailed records of your income and expenses, you will also likely wish to work with an accountant and tax preparation specialist for your first year as a freelancer. The process of filing self-employment taxes, understanding what you can and cannot deduct regarding your expenses, and the like is quite complicated and difficult to navigate for the first time.
Working with an accountant and a tax preparation specialist will give you the benefit of the expertise so that your taxes are filed correctly. They can also walk you through the steps of filing self-employment taxes for your freelance business so that you can attempt to do your taxes yourself or have more of a role in the process during the second year of your freelance career.
If you put this advice to use in your tax preparations as a freelancer, you can be sure that you start everything off on the right foot when it comes to your latest career endeavor.