As a freelancer, you get to be in charge of the business, choose your hours, and pick where you work. You also choose which projects you complete. Freelancing is an excellent opportunity to earn extra money throughout the year. But you need to keep your services well documented. If you do not do your taxes correctly, you can lose most of the money you earned from this work. In this article, you will learn tax tips to keep your small business or remote work earnings.
Do You Qualify To Be A Freelancer?
If you complete work for a company or client while not being an employee, you can qualify as a freelancer. You need to report income from this job if you receive over $400 in a year for these services. If you fit this description, here are the tax forms you need to know.
Being Prepared For Tax Season
All freelancers need to document their finances to prepare for tax season. Keeping good records is always important but, with finances, the IRA is strict. They can disregard a receipt for having faded ink during an audit. Having a digital copy of your financial records is very important for this reason. Many small businesses will get financial software to help record financial records. It is helpful if you complete services for clients in more than one state. Filing income taxes for multiple states can be difficult without financial software.
Another tax topic for freelancers is the self-employment tax. Self-Employment taxes go towards Social Security and Medicare. Your employer usually pays half of those taxes. But as a freelancer, you will have to pay both halves of these taxes. Dave Ramsey recommends putting 25-30% of each check towards paying the self-employment tax.
What Can You Deduct As A Freelancer?
Freelancers can deduct expenses on office expenses, business-related food, lodging, required equipment, and more. Expenses of education certificates and classes related to your business are deductible. These deductions create an incentive to continue your education and sharpen your skills.
A home office or renting a small office space is a deductible expense. Your office utilities and expenses are deductible as a business expense. Alexa’s Workspaces has several office options available to provide your business the resources it needs to succeed. Both of the all-inclusive office buildings have great support for small businesses. Choosing an all-inclusive office can reduce overhead costs or grow your entrepreneurial business. It will help develop your company and save you money by lowering your taxes as well.
Becoming a freelancer has many tax advantages. To take advantage of them, you must always record your finances and know your deductions. Deductions on your office utilities and expenses are valuable during tax season. Speak with an advisor at Alexa’s Workspaces to find the best office space for your small business. Contact us today at email@example.com to receive more information.