Freelancing: Taxes Made Easy
Freelancing certainly has its perks. Being able to the work you want, when you want is no doubt an appealing prospect for many of us clocking in and clocking out week after week. However, while you may be able to wake up at noon more often than your 9-5 friends, you most likely won’t be doing so come April. Freelance work comes with the additional burden of having to file all your one-man business income, expenses, and everything in between, all on your own. Thankfully, with a bit of tax knowledge and some initiative, tax filing for freelancers does not need to be as daunting a task as it might otherwise be.
While most individual freelancers may assume that they are locked into the sole proprietor business structure, the Single Member Limited Liability Corporation (SMLLC) offers an alternative that may be preferable in some scenarios. This structure does include some additional costs than the sole proprietor model, but the reduction in personal liability from business debts could be worth those costs for some freelancers out there. So long as you don’t chose to treat your SMLLC as a formal corporation, filing is just as easy as if you were operating under the sole proprietor model, involving simply attaching a Schedule C to your personal tax return.
Beyond your choice of business structure, there are also a variety of small things that can be done to help make freelance taxes a breeze. To avoid turning over a years’ worth of disorganized work from your various projects, using income and expense trackers will prevent a lot of headaches going into April. Importantly, these trackers should be kept separate from your personal use trackers (which if you don’t already use, you should!). If you aren’t sure what you owe, it is always better to overpay than underpay at the end of the day, and get a nice refund rather than hit with a truck of unexpected penalties. Additionally, even if you expect to owe less than $1,000 in taxes and are not required to make quarterly payments by law, it will make April a lot easier if you have already taken care of most of what you owe. Lastly, understanding the Schedule C form would of course make things much easier.