Being a freelancer of any type definitely has its benefits,
such as setting your own schedule and controlling the amount of money you make.
With that said, though, taxes are something that can be a bit more complicated
for a freelancer than for the average person.
When you’re a freelancer, any profit you earn through your
freelancing will increase your taxable income, which will thereby increase your
regular income tax and your self-employment tax. Furthermore, as your own
employer, you have to pay the full amount, instead of the half that traditional
employees pay, for your Social Security and Medicare taxes. Obviously,
navigating all of these responsibilities, especially if you are new to
freelancing, can be difficult. Fortunately, you can manage it all by following
some simple advice.
Set Aside Money For Your Self Employment Tax
First things first, one thing you should get into the habit
of doing is setting aside money on a regular basis, preferably once a month, to
pay your self employment tax. You can get a decent idea of how much money you
need to set aside each quarter by taking your estimated net profit, multiplying
it by 15.3% and then dividing that into four monthly payments. As long as your
estimations are decently accurate, this should prove to be an effective
strategy for budgeting for your self employment tax.
Enroll in the Electronic Federal Tax Payment System
Another good tip that you can follow is to enroll in the
Electronic Federal Tax Payment System. Once you register with this site, you
should find it very simple to make estimated tax payments online via your
checking account. This is another simple way to ensure your taxes get paid in
full and that you don’t find yourself in trouble with the IRS.
While these two tips are extremely helpful, they are really
just the tip of the iceberg when it comes to all that freelancers need to know.
If you can follow these tips, though, and seek the help of a qualified
financial adviser who is familiar with dealing with freelancers and their
needs, you and your taxes should get along just fine!
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