Posted on: 23 August 2019
When you decide to start working freelance, you will have a lot on your mind and on your plate. One aspect of being a freelancer that you may not have thought about is your taxes. Tax return filing can be a bit more complicated when you are self-employed, and it is important to know as many of the facts about taxes and freelancing as possible. Once you know some of these facts, you will be better able to manage your self-employment finances going forward.
You Will Pay More Taxes than You Would as an Employee
Working for yourself has many advantages, but there are some aspects of working for yourself that are not quite as pleasant. How much you pay in taxes is one of those less pleasant aspects. When you work for an employer, they pay a portion of your income taxes for you, meaning you only pay a small percentage of your income in taxes.
When you work for yourself, on the other hand, you are responsible for the full tax amount. This means that you need to set aside more of your income for tax payments. Generally, a good rule of thumb is to save between 20 and 30 percent of your income for tax payment purposes. You may end up owing less than that after all of your business expenses and deductions, but it is better to have too much paid in taxes and get a refund than to owe taxes at the end of the year.
You Will Need to Pay Your Taxes Quarterly
Another fact you might not know about doing your taxes as a freelancer is that you will need to pay your taxes quarterly. Quarterly taxes are a way for the IRS to ensure businesses (in your case your self-employment business) pay their fair share of taxes throughout the year. Think about it this way. As an employee of a business, you paid taxes every month or every two weeks (depending on how often you were paid), and as a self-employed individual, you do not do that. This is why quarterly taxes were put into place.
These taxes are due in April, June, September, and January. They fall as close to the 15th of the month as possible but are always weekdays. This means sometimes the date may be the 16th or 17th. Be sure you pay these quarterly taxes on time or you will face a penalty and fees on your tax return filing.
Now that you know some of the important tax facts you should know as a freelancer, you can be sure you are doing what you can to make filing your next tax return as easy and painless as possible.Share