Being a freelance writer works out great for a lot of people. You get to skip the morning rush hour traffic and even forego the traditional office attire if you wish. You don't even have a nagging boss on your shoulder telling you what to do all day. Even though you may not have the conventional bosses as a freelancer, there is one main boss that you cannot avoid: Uncle Sam.
When tax time rolls around in April, you better believe Uncle Sam will be reminding you that you still have to pay your dues. If you want to keep that bill that good ole Sam hands you down to a manageable number, there are some simple rules that you should be following.
Arrange a tax account aside from your usual banking account.
It sounds like a complicated task, but having an extra tax account can be one of the most intelligent decisions you make as a freelance writer. Keep this account completely separate from everything--even your usual business funding or payment account. When you get paid, simply slip a small percentage of what you earned into the account, 10 to 15 percent will work, and make sure you don't touch this money for anything, ever. Seriously, just pretend it no longer exists until your tax bill comes in.
Be sure to pay quarterly taxes.
The simplest way to avoid an unruly bill from Uncle Sam that sends you into a panic is to do just what the IRS recommends. If you are earning the majority of your income as a freelancer, you should start paying quarterly taxes. The IRS even provides a handy tax estimation worksheet that you can use to determine just how much you ought to be paying. Plus, you should know that if you spend the year knowing that you should be paying quarterly and don't, you may be handed stiff penalties come tax filing time.
Carefully monitor every expense you can find.
That new printer you bought to print customer invoices is a potential tax deduction. That corner closet you transformed into a work space, it's a deduction as well, and so is the long trip you took to a nearby city for a business meeting, the cell phone you use to communicate with clients, and even items as small as that new office chair or the paper you bought for your printer. Keep detailed records of every expense that you have related to your career because, at the end of the year, all these costs can bring down your tax bill.
For more information and assistance, talk with professional tax consultants, such as those at Wiggins, Smit, Burby, Reineke, & Company P.A..