Freelancing Online and Taxes

One of the questions I frequently get is “When do I have to report my earnings?”  The answer is when you make $600 or more in a year.

Keep in mind, you will owe a self-employment tax since you have your own business.  It may not be much depending on how much you earn.  One of my first years, when I was doing it part-time, I think I made a little over 7k and my self-employment tax wasn’t much.  I don’t remember exactly what it was but I didn’t have to come out of pocket because of my filing status, child tax credits, etc.  They still ended up sending ME money!  So don’t fret, it will even out with what you make but the more you make, the higher it will be.

No one told me about self-employment tax when I first started!

As a freelancer it’s always a good idea to save every receipt for everything and try to get every possible write-off.  You can get more information on what you can write off by consulting a tax specialist or doing a search on the Internet.  I prefer a tax specialist because they will help you get every little penny written off – things you didn’t even think of!  You might want to shop around for a tax specialist because some are simply better than others and more helpful when it comes to saving every little tenth of a penny and to us that’s important!

As a general rule of thumb, anything you paid for as part of your business or freelance work is a deduction.  I’m talking everything from paper to postage, to printing supplies, memberships, classes, ANYTHING and EVERYTHING.  Lunches or dinners can be written off if they are ‘business related’.  NEVER throw away a receipt!  Keep them all, it all adds up at the end of the year!

You may even be able to write off some of your home expenses if you have a ‘home office’.

There can be some pros and cons to some of this which is why I recommend talking with a tax specialist, particularly once you start making some decent money.  If you’re only doing this for a little extra income here and there, it might not even be worth it to worry with all the small stuff, just be sure you still file your taxes – you really don’t want the hassle of Uncle Sam.

And it’s a lot easier if you not only keep all of your receipts but track your expenses throughout the year.  This way it doesn’t seem so overwhelming to figure it all out at the end of the year.  There are a number of ways you can do this and you just need to figure out what works best for you and the easiest method you see yourself keeping up with!

I’m sure this goes without saying, but be sure you keep a record of all of the money you made.  It’s best if you keep a journal or a spreadsheet and write down the details every time you get paid.  This will really make your life a lot easier when it’s that time.  Waiting until the last minute can really end up being a headache.  It’s easy not to do this so just start doing it from day one and you’ll be glad you did!

If you plan to file yourself, instead of having someone prepare your taxes for you, you can order the tax forms you’ll need from the IRS website.  Go ahead and order them in advance so you’ll have them.

You can usually get these forms at the Post Office and office supply stores too.

Believe me when I say it’s much easier to prepare for all of this than find yourself trying to figure everything out, get the forms you need, sort through deductions, go back and tally up how much you made, etc. at the very last minute.

So be prepared and track your earnings and expenses throughout the year – even if you set aside a day once a week to enter it all in and tally up.

Don’t be the one pulling your hair out when it’s tax time feeling overwhelmed with the big mess you have to tackle!

K