Tax Tips for Freelancers

Tax Tips for Freelancers

Freelancing offers flexibility and scheduling freedom that an employee may not have, but not having a regular paycheck can be difficult. Tax time can also be a challenge. Here are some tips to think about as tax time approaches.

Save Money Throughout the Year

Since there is no income tax deducted from your paychecks, you will need to pay quarterly estimated taxes to your state and the federal government. Your CPA will use your tax return to determine how much needs to be paid. According to a recent survey by CreditDonkey.com, 16% of freelancers have been unable to pay their taxes at some point. Work with your bookkeepers and other financial experts to come up with a budget that you can follow in order to save money, both for taxes and for unforeseen situations.

Track All Expenses and Maintain Records

Quality bookkeeping and recordkeeping makes your CPA’s job much easier. Properly kept books will show them different possible deductions, like travel, meals, and health insurance, already separated out. This can save your CPA time and save you money. Keep your receipts organized so you can easily send copies to your CPA.

Claim Your Home Office

For tax purposes, your home office is a separate or partitioned area of your home that you use regularly and exclusively for work. Starting this year, the IRS is offering a simplified option for calculating the home office deduction. With this option, the size of your home office is based on its square footage (up to 300 square feet) and there is a standard deduction of $5 per square foot. All home-related itemized deductions, like mortgage interest and real estate taxes, are claimed in full on Schedule A. There is no home depreciation deduction or later recapture of depreciation for the years the simplified option is used. Discuss the best option for you with your CPA.

Deduct Your Mileage

If your home is designated as a home office, your mileage to visit clients or other work locations becomes deductible. For 2013, you can claim 56.5 cents per mile, plus the cost of parking and tolls. Detailed recordkeeping is the key to this deduction. Keep records of when and where you traveled and make sure to keep all receipts for parking and tolls.

For more information, visit the IRS, Entrepreneur, TurboTax, and Daily Finance.

Comments (0) Filed Under: Taxes

Comments are closed.