Top 10 Tax Strategies for Freelancers and Other Self-Employed Individuals

If you’re a freelancer or other self-employed individual, you’ll want to be well-prepared for your tax season. It can be challenging, and even overwhelming, to file your own taxes. While many people would rather hire an accountant or bookkeeper, there are some strategies that you can use to minimize your tax liability.

For starters, you should set aside a percentage of your earnings for taxes each month. This will help you avoid underpayments when it comes time to file your annual taxes. Also, make sure to keep track of your business expenses, and deduct these.

The IRS offers a standard daily meal deduction, and some industry publications and magazines can be considered as deductions as well. You can also get a deduction for travel costs, such as train fare and hotel room costs. BZ Beez Tax & Insurance Services

Health insurance costs can also be deductible, as long as you pay for them yourself. However, you won’t be able to deduct premiums if your spouse has subsidized health insurance through his or her employer. Aside from that, freelancers can contribute to a self-employment IRA, which allows you to put away more money than you can with a traditional 401k.

You can also deduct startup costs, which can include the cost of setting up a website and business licenses. The IRS allows you to take a $5,000 deduction for startup expenses, but that decreases if your expenses exceed $50,000.

If you’re self-employed, you’ll also need to prepare your state and local taxes. For example, you’ll need to file your income and property tax forms, and you’ll need to report your business income and expenses on a Schedule C.

In addition to those, you may need to pay quarterly estimated taxes. Traditional employees don’t typically make these payments, but you should. Failure to pay them can result in a large tax bill at the end of the year. But with the right software, it’s easy to stay on top of your taxes.

Freelancers and other self-employed individuals may need to pay estimated taxes for their state, as well. Depending on where you live, the state tax rate may be as low as 10%, or as high as 15%. Make sure you know what your state’s rates are, and don’t let the IRS make you pay more than you should.

To be successful, it’s important to maintain an organized business. One way to do this is by hiring an accountant. An accountant can keep your books in order, help you identify deductions, and help you file your taxes correctly. Using a good accountant will also ensure you claim the most valuable deductions, which can save you thousands of dollars each year.

Another option for freelancers and other self-employed individuals is to hire a tax preparation company. Most of them offer tax software that can automatically calculate and prepare your taxes, and can help you keep your accounting in order.

Keeping track of your business expenses and identifying the deductions you can qualify for can be tough, but it’s possible. If you’re struggling, it might be best to hire an accountant.