This is my ninth year of full-time freelance writing, which I would like to say makes me a freelance tax expert..
However, the truth is, I learn something new every year – whether it’s how much to set aside for estimated taxes, what accounting software I should be using, or what percentage of my internet bill counts as an expense. business.
I am going to give you this tip, as someone who has been in the independent tax payment game for quite some time: the best thing you can do as a freelancer it’s getting a CPA, and the second best thing you can do is ask your CPA questions. Trust me for this shot.
Asking the right questions can save you a lot of time and prevent you from ending up with an unexpected tax bill in April.
Ask these questions before tax time
here are some the questions I would have liked to ask my CPA when I started doing freelance taxing, as well as a few things I wouldn’t have known unless my CPA told me.
Remember that I am not an accountant, So if you want real tax advice, you need to ask your own CPA these same questions:
1. Is there any favorite accounting software you would like me to use?
When I started working as a freelance I did all my bookkeeping on one handmade worksheet, assisted by a few Gmail folders titled “tax deductions”, a box of paper receipts and my bank statements.
Last year I had a new CPA who suggested I switch to standard accounting software. It would make her life easier, as she wouldn’t have to decipher my spreadsheets – which makes perfect sense to me – and she thought it might make my life easier, too.
Turns out she was right.
If you aren’t already using independent accounting software, it’s worth trying one. The Write Life recommends FreshBooks and Harvest, but you should also ask your CPA if they have any preferred accounting software.
2. What should I do about estimated taxes if my income increases?
This is the only question I would have liked to ask in 2014.
The first CPA I worked with looked at my earnings from 2013 and gave me a set of estimated tax vouchers to use on my 2014 quarterly estimated taxes. I received four completed estimated tax forms, each with an amount of money I was supposed to pay. All I had to do was write the checks and deposit the estimated tax receipts in the mail by their respective due dates.
However, I increased my freelance income significantly that year. I didn’t realize that meant I paid much less estimated taxes that I should have paid.
My CPA and I discovered that with the increase in my income, I owed the IRS an additional $ 5,443.
If your CPA gives you estimated tax credentials, ask what to do if your income grows.
In my case, I started setting aside a percentage of my income for estimated taxes, instead of paying a fixed number on a voucher.
3. What can I – and cannot – do in my home office?
I was freelance in a studio and my CPA told me that since I used the same small table to write, eat, and watch TV shows on my laptop, it didn’t count as a home office.
To claim the home office deduction, he explained, I had to have a space reserved just for work.
When I moved into a larger apartment, I had enough space to reserve a corner for a home office.
If you want to claim the home office deduction, Talk to your CPA about what you can and can’t do in this space to make sure they qualify.
4. Is my laptop a depreciating asset?
Your CPA may ask you questions about depreciation of assets, which are physical objects that lose their value over time.
You’re allowed to deduct part of the cost of that asset over the life of the asset, which is the kind of statement that’s complicated enough that you really have to leave it to your CPA.
But you should also ask your CPA if your laptop is a depreciating asset. If you use your smartphone for business, or have cameras or microphones for vlogging or podcasting, find out about that as well.
Any technology that you use for work and that you replace on a regular basis can be considered a depreciated asset, and get another tax deduction.
5. What percentage of my telephone and Internet bills can I deduct?
If You Use Your Home Internet For Business – And What Does The Freelancer Not Do? – you are entitled to deduct a percentage from your internet bill on your taxes. The same goes for your smartphone bill.
Depending on what your CPA thinks about your home office, you may also be able to deduct some of your utilities. Request. Don’t assume your CPA will talk about it.
6. Do I need a commercial license?
Sometimes paying federal and state taxes isn’t enough. Depending on your business, you may need a business license, which includes business taxes. You may also have to pay tourist taxes.
So ask your CPA if you need a business license. Don’t just go to your state’s licensing page, search for the licenses and assume you’re okay because you don’t see a “freelance writer” licensing option.
I pay professional taxes to Washington State under the category “Services and other activities; Game of chance competition (less than USD 50,000 per year). This is why you need to ask a professional about this stuff.
7. Which deductions should I follow?
Freelancers are often entitled to more deductions than we realize, and we deserve to claim them all. If you go to a writers conference, for example, you can probably deduce the cost of the conference, the cost of travel and a percentage of your meals.
But you won’t know what you can deduct until you ask for it. Research material? Postage? This time, you asked another freelance writer for an informational interview and paid for coffee? What about the Lyft you took to interview a source? Or the mileage if you drive your own car?
There are many potential freelance deductions, so it is important to track your expenses, even the smallest, and ask your CPA which of these expenses you should deduct.
Be sure to ask what deductions you might forget, or what deductions you should take for next year’s taxes, like the cost of the accounting software you just purchased!
Getting a good CPA is the first step in running your freelance business effectively.
Asking the right questions – especially at tax time – is the second.
Do both and you will likely find that your freelance taxes get easier every year.
What questions would you like to ask yourself when you started freelance taxing?
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This is an updated version of a story that was posted previously. We update our articles as often as possible to make sure they are useful to our readers.