Intro to how to pay taxes as a freelancer
Hi, I’m Alex
A CPA with 18+ years of accounting experience. I help individuals and small-businesses with their tax situations to reduce and budget for taxes through planning and timing of transactions.
Obviously you’re here because you’ve started your own business or are thinking about doing so. Maybe you have some great ideas on how to improve on an industry you’ve spent your career in, have an idea for a new invention, or just want to get out of the day to day grind of corporate life and want to be your own boss.
Entrepreneurship can be a fun and profitable venture. One of the most important parts of this journey is setting up the business for success and much of that starts with determining the type of entity, how to set up the accounting, and tax planning. These things may not be in your wheelhouse which is why we’ve put together this guide to help point out some of the different types of business structures along with tips to ensure a smooth start and continued success as your venture grows over the years.
Accounting and tax can feel overwhelming but there are many things you can do to help yourself and minimize headaches down the road. One of the most important things you can do, regardless of the type of business you set up, is to keep your business and personal finances separate.
Even before you have earned your first dollar you should set up a business bank and credit card account. Setting up a business, whether it is registering a trade name, paying for insurance, or buying a computer and software all require money and all of these items are tax deductible if they are part of your business (more on this here).
Another helpful tip is to be proactive in the beginning with tax planning. Talk to a tax professional to come up with a plan and understand how the different types of businesses affect your tax situation. While the tax laws are completely different for sole proprietorships compared to corporations one thing is the same, it is a lot easier and cheaper in the long run to start off doing things correctly than it is to try to fix the past.
We’ve set this tutorial up for you to do just that and find continued success along your journey whether it’s a side hustle or the next Fortune 500 company. Best of luck to all you freelancers!
Taxes are complicated. There wouldn’t be an entire industry built around them if they weren’t.
Even if you just want to meet your legal requirement to file your return (forget about trying to access any deductions and credits), there is still paperwork to file, questions to answer, and deadlines to meet.
As a freelancer or independent contractor, tax season brings even more challenges and work. You have to play by different rules and use different forms than you would as an employee. Factors such as where you work and what you do may impact your taxes in new ways.
Most importantly (and maybe alarmingly), it all rests on your shoulders.
In this guide, we’ve included everything you need to know about paying taxes as a freelancer. Before we get into the gritty details, though, we want to answer the most important question on this topic.
Do I have to pay taxes on freelance work?
Yes! Everyone has a legal responsibility to pay taxes on their income, both in full and on time. As a freelancer, you can’t rely on your employer to handle paying your taxes. You have to do all of the work yourself.
If you aren’t aware of your responsibilities, you may end up paying more than you need. You might even get in trouble for underpaying or filing incorrectly.
Save yourself the money, headache, anxiety, and stress of winging it (and risking doing it wrong) with the information in this guide. These tips are all freelancer-focused and CPA-approved to make sure we can help you cover your bases and do things right.
Ready to barrel through Freelance Taxes 101, conquer the mother of all necessary evils, and maybe even save a little money along the way?
Let’s get to it.