The Freelancer’s Guide to Navigating Tax Season Like a Pro

Freelancing has liberated individuals from working under the traditional working time frame, allowing them to pursue their passions and enjoy breaks from their rigid routines. As a freelancer, you have the benefit of working in the comfort of your place and for different businesses, as well as the freedom to understand your business, including taxes. Preparing for your upcoming tax filing is crucial, as it determines the workflow for

the next financial year and eliminates concerns regarding tax payments at bay.

Contact a reputed accountant in Clifton Park and Albany to navigate your upcoming tax season like a pro. Read on to understand the practices and habits that can ease your tax clearances.

Always Utilize Contracts

Individuals who are new to freelancing may skip contracts before sealing the deal. This potential mistake can cost you more if all the clients neglect to provide payment sheets and proof of working for them. Ensure that you derive a contract sporting your work area along with the payscale to ensure it can be submitted during tax filing day. If you are in a state to refuse work on additional clients’ requests other than the agreed ones, then the contract shall protect you, even if the client decides to report you over the Internet.

Recording All of Your Transaction

Every other work-related transaction must be recorded to avoid issues that can happen while filing your taxes. Keep track of your freelance work income and cash flow by allotting a separate account for all your freelancing endeavors. Also, you must send out an invoice to your client before receiving any size of payment from them. Similarly, track and maintain your expenses, including travel costs, business meetings, equipment investments, and even health insurance premiums. All these are vital to calculate your overall profits accurately. Such records can help bypass penalties and ensure your income report is submitted correctly.

Setting Up a Percentage of Your Paycheck Aside

Unlike full-time employees, you may receive either a partial or full amount of your paychecks. You are responsible for taking out taxes from the received payment and clearing them while filing your income taxes for the year. This is where you need to set aside a percentage of your cleared checks. Although the exact amount you need to pay under income tax norms can vary based on numerous factors, it will be better to save them instantly and utilize them in the right instances.

Setting Up Reminders Regarding Income Tax Payment

After understanding how you will be taxed as a freelancer, you must also pay utmost importance to the due date to clear them. Every other state has its set of tax deadlines. Be sure to look for the tax deadline date at your local address and create a reminder in your calendars. You can even set reminders to meet the accountant to discuss the tax payment differences and to derive a valid tax filing for the year. By doing so, you can remain stress-free and avoid penalties for bypassing tax payment due dates.

Wrapping Up

Filing taxes can sound complicated for freelancers at first, but proper preparation and acquiring help from a reputable accountant will help you figure out things quickly. Spending a small part of your day to record your income and expenses can let you file taxes at ease. Keep your income and expenses organized using software and contact your accountant even during the non-tax payment clearing days to plan out and handle your upcoming tax season like a pro.

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