When you start writing on a freelance basis for online media sites, magazines and newspapers, you might not realize that you are now running a business. Because of that, you'll need to keep an eye on some accounting tasks to make sure you pay appropriate taxes and maintain your finances properly. Use the following accounting tips to help you.
Separate Personal and Business Spending
It can be hard for you to get used to the idea that you have a business when you're writing as a freelancer. As a result, you might keep all your spending on the same debit card and use the same bank account for all your financial transactions.
However, to make tax time easier, you might instead choose to get a separate business checking account so that you can more clearly get an idea of your writing income and work-related expenses. That way, when you have to estimate deductions or calculate income from multiple clients, you'll be able to do so without the headache of separating out personal spending first.
Keep Files Organized
If you are like many writers, you may keep your invoices and receipts in different places around your house. However, when you need to find receipts for taxes or an invoice for an old client, that can be a problem.
To avoid problems, devise a way to keep your files organized and stick to it. Your organization system might be as simple as keeping invoices, computer repair bills and writing course receipts separated by different colored folders. You will then be able to locate information when you need it.
It is also a good idea to print out any financial records so that if your computer fails, you won't lose that information. You might also put important files on a flash drive to keep track of them.
Take Care of Quarterly Taxes
As a freelancer, you need to pay self-employment taxes quarterly throughout the year once you make more than $400 per year. You might be responsible for state, federal and local taxes.
To know the right amount of taxes to pay, it's wise to get in touch with a local business accountant. You might not think you need to hire an accountant, but an expert in accounting services can help you avoid problems that lead to high fines and penalties.
Use the information laid out in this article to better take care of your finances when you are a freelance writer. Work closely with your accountant (like those at James Gioia & Company PC) to ensure that your business stays in good shape.