I love everything about my life as a freelancer. I set my own hours, which means I get to spend most of my days with my three young kids. I only do the work I enjoy; because I pitch my own ideas to the people I want to work with. I have a level of control over my income, ramping up my work when I need some extra cash or scaling back when I need a little more balance in my life. It's awesome, but there are some downsides -- and the biggest downside of all might be tax season.
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I'm learning to spend all year preparing myself for April 15th, but that doesn't mean you're in deep waters if you are just now starting to think about the big day. Here's your guide to making it out of tax season (mostly) unscathed.
Start a checklist
If your freelance life is anything like mine, you've probably had more clients in the last year than you can count on two hands. Starting in January, create a checklist of tax documents you need to receive before you file so you can keep track of the endless paperwork. This checklist should include a 1099 or W-2 from every client who has paid you this year.
Hire an accountant
Unless you're a tax guru (and you're probably not, because you're reading this article), you need to hire someone to do your taxes. Self-employment taxes are a little more involved, especially if you have a lot of expenses to deduct and have multiple sources of income. Don't wait until the last minute either, make an appointment now so you have plenty of time to prepare. You may owe more than you expected or run into troubles with some of your documents.
Match your records to your 1099s
In a dream world, all of your clients would be so on top of their records that they deliver flawless tax documents to you weeks before their deadline. Unfortunately, we don't live in that world and you should anticipate finding mistakes on the 1099s you receive. That is why keeping your own record of income is so important, so you can match your records to your documents and request a correction if any mistakes are made.
Deduct every little thing
When you're self-employed, a lot of your expenses can be deducted, lowering what you owe come April. For freelancers, some of the most common deductions include continued education, supplies, phone and internet expenses, a home office, and any mileage or travel related expenses associated with your work. When in doubt, talk to your accountant about what is and isn't considered a business expense.
Prepare for next year
Once you've filed your taxes and paid every cent of what you owe, don't be tempted to stop thinking about taxes until next year. Now is the time to start preparing by paying quarterly taxes, keeping careful track of your income and documenting your expenses like your life depends on it.