Is being self-employed better than working a 9-5 job?
A lot of Americans think so!
Research shows that 30% of Americans are currently earning a living by freelancing. From writing to marketing, there’s a seemingly endless list of self-employment opportunities out there.
If you’re self-employed, one of the most significant learning curves you’ll have to tackle is figuring out how to do your taxes. To help you out, we’ve created this short but complete guide all about tax paperwork for freelancers.
So take a look! After you get your taxes out of the way, you can focus on making more money.
Use the Right Forms
First, let’s kick things off by looking at what forms you’ll need to include in your tax documents. Here are three forms you’ve probably heard fellow freelancers talking about:
There are different types of 1099s, but for tax purposes, you only need to learn about the 1099-MISC form. A 1099-MISC form helps you document miscellaneous income sources while you’re self-employed. Clients are supposed to send you a 1099-MISC form, which means you could wind up having multiple 1099-MISC forms at the end of the year.
Does your company have employees? Then you’ll need to give them a W2 form every single year. We suggest using a w2 creator to make things easier on yourself. Finally, there’s the 1040-ES form, and this form is for calculating what you owe in taxes.
Gather Financial Statements
In addition to getting the right tax forms, you also need to keep thorough financial records. For instance, you’ll need documents to prove your annual earnings and documents that prove your annual expenses. To prove your expenses are legitimate, make sure you’re keeping receipts of everything you purchase for your business.
Next, you’ll also need to keep track of your cash flow, which is different than your income. Cash flow documents include things like cash sales, loans, and investments.
Does this sound like an overwhelming amount of paperwork? Don’t worry. You can purchase a tax paperwork organizer to help make things simple!
Understand Tax Deductions
Tax deductions can be a real game-changer when you’re looking at paying a high tax bill. Here are some of the top deductions you may qualify for as a self-employed individual:
- Self-employment deduction
- Health insurance premiums
- Home office
- Business supplies
- Retirement contributions
If you’re going to deduct a home office, you’ll need to gather your mortgage tax paperwork. Finally, for tracking your education, keep thorough records of all of your tuition payments and yearly education expenses.
Feel Good About Your Tax Paperwork
Gone are the days of being afraid of tax paperwork! Now you know a few of the most tax tips so you can file your taxes with confidence.
Remember that organization is critical when it comes to successfully filing your taxes as a freelancer. The more organized you are, the easier it’ll be for you to avoid making costly tax mistakes. For more tips like the ones in this article, check out the rest of this site.