How to File Taxes as a Freelancer: A Simple Guide
The self-employment tax rate is 15.3%, which is for social security and medicare. This tax is on top of income taxes.
If you aren't sure how to file taxes as a freelancer, you might be overpaying.
Not knowing the best way to do your taxes can cost you thousands of dollars -- or an audit. We are here to give you information to help you avoid audits and unnecessary tax payments.
Continue reading this article to get the best tips for filing taxes as a freelancer.
How to File Taxes As a Freelancer
As a freelancer, you need to track your earnings and taxes. If you're a W-2 employee, you can see your earnings on your pay stub. When you're a freelancer, you don't get a pay stub from your employer.
You can create pay stubs for yourself to keep track of the money you make. You can create them to look the same as a pay stub you get from an employer with all the information you need.
How Much Taxes Do You Pay?
The next thing you need to know is how much money you need to pay in taxes. While we talked about self-employment tax, the other part you have to pay is your income taxes.
Keep in mind that you don't have to pay taxes on all of the income you bring in throughout the year. Gather more information about the income tax calculator.
Some of your income isn't taxable because you get to subtract your business expenses before determining the income tax you need to pay.
Track things like business travel, office supplies, on-going education, and other expenses related to your business. If you aren't sure what deductions you can tax, you should speak with a tax professional since these deductions can save you thousands of dollars.
Setting Aside Money for Taxes
When you prepare to pay taxes, many experts say it is a good idea to put aside twenty-five to thirty percent of your income for taxes. If you want to stay on track and keep yourself from tapping into these savings, it is a good idea to pay estimated taxes each quarter.
If you don't pay quarterly taxes throughout the year, you might get a penalty at tax time.
If you aren't sure if you will get a penalty or not, you should speak with your tax professional for advice on whether to pay quarterly taxes or not.
Paying Taxes as a Freelancer
Now you know how to file taxes as a freelancer. Use these tips to make tax time as painless as possible. Being prepared properly throughout the year makes a big difference when the deadline rolls around.
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