Tax season comes the same time every year, but many freelancers are caught by surprise each time (I used to be in this group - for years!). If you're a freelance writer - especially if you're new to freelancing, you're either a little uneasy around this time of year, or feeling pretty good because you're the organized type who's got things under control.
If the former sounds like you, following are three freelance tax tips to help you get ready for good ole Uncle Sam. Practice these every year, and you'll never get that uneasy feeling in the pit of your stomach again when tax season rolls around.
Freelance Writers: 3 Things You Can Do -- Now -- to Make Filing Taxes Easier
I. List ALL of Your Expenses: On the surface, freelance writing is a pretty straightforward business without many expenses. It's one reason so many are attracted to it. But, these little expenses can add up. I've been a freelance business owner since 1993, and following are just some of my obvious - and not-so-obvious expenses:
Web hosting fees;
Domain name registration fees;
Web design fees (I design a lot of my own websites, but for platforms I'm not comfortable in, eg, Wordpress, I outsource tweaks I want done to a theme);
Internet fax service;
Digital camera (to take photos for my blogs);
Ebook cover creation software (I write and sell my own line of ebooks,and also create graphics for special reports I use for content marketing);
As you can see, these can add up.
Recognizing Freelance Business Expenses Tip: Mentally do a walk-through of some of your days as a freelance writer.
Do you attend networking meetings at your Chamber of Commerce; does FedEx pick up packages from your home office; do you use e-fax because you have a paperless office; do you use an internet based service like Carbonite to back up your files when you close up at night; etc.?
By doing this kind of mental walk through, you remember expenses it can be very easy to forget (eg, your monthly e-fax bill; your annual backup data storage fee; your mileage to weekly networking meetings, etc.).
II. Income: Income is much easier to remember than expenses. But, as a freelance writer, you may have completed a few "one-off" jobs that clients don't send a 1099 for.
Just because they don't send a 1099 doesn't mean you shouldn't report that income. In order to prevent this, devise some sort of tracking system, or use some type of accounting software (eg, QuickBooks) that make forgetting impossible.
III. Questionable Write-Offs: Is your home office really use just as a home-based business office, or do you use it as your sewing room too? If so, how do you account for it? If you take a client to lunch, can you write the whole thing off, or only part of it?
If you take a business-related trip, but tack on a few days for vacation, how much of your trip is deductible (meals, car rentals, plane tickets, money exchange rate fees, etc.)?
All of these are sticky tax situations. If you use an accountant, they will be able to resolve them for you. But, if you do your taxes yourself, it can get tricky.
FYI, if you use a tax preparation software like TurboTax (I've used it for years; no affiliation -- just a happy user), it can guide you in answering these types of questions. You can even request help from an actual tax expert (for a fee).
Freelancing and Taxes: Conclusion
As you can see, there's a lot that goes into preparing taxes when you freelance, because it's a home-based business. If you're new to freelancing, you might want to consult a tax professional so you can get all of the write-offs you're entitled to.
FYI, learn more in this in-depth post on freelance taxes.
Happy tax filing!
About the Author: Yuwanda Black has been a freelance writer since 1993. In 2008, she founded -- and heads -- New Media Words (NewMediaWords.biz), an SEO writing company. She's the author of over 50 ebooks, many on the various aspects successfully starting and operating a home-based freelance writing business.
Keywords used in this article: freelancing and taxes, freelance tax, freelance taxes, freelance writing taxes, freelancer taxes