Last Minute Tax Tips to Make Your Life Easier
There are a lot of last minutes when it comes to freelancers and taxes. If you freelance full-time in the U.S, you’re expected to send in quarterly estimated payments, in addition to doing your yearly routine.
Even though taxes can be fairly routine, it’s worth making sure that you’re doing everything you can to make sure all the details are taken care of. That helps to make sure there’s more money in your pockets, and it also means that you will limit your tangles with any tax agency you deal with.
Double Check Your Tax Agency
Personally, I deal with the IRS because I’m located in the U.S. But I also have to make sure that my state tax agency is happy, and there are even some county taxes that I have to take care of.
It’s easy to forget that the state needs to get its tax payments — I actually forgot entirely once. It’s not an unsolvable problem (you will usually figure it out when you do your tax return each year), but if you can take care of everything at the right time, it’s better for you and your freelance business.
Put all the dates for each tax agency on your calendar, not just the big guys. You can automate some payments, but make sure you note exactly what you need to do for each deadline.
Triple Check Every Document
I go over everything I send to the IRS at least three times, even if I’m just dropping a check in the mail. It’s not paranoia, either. I’ve caught situations that could have become difficult, such as when a client reported to the IRS that they paid me more money than I had actually received. I didn’t notice this my first time looking through my stack of 1099s, either. That could have resulted in the IRS asking me for a lot more money than I actually owed if it had gone through.
You have to check that every number is correct on your taxes. If something goes wrong, even if you didn’t do your own taxes, you’re ultimately responsible. A piece of tax software certainly isn’t going to be able to placate the IRS. Your clients can report anything they want on their own taxes and a tax preparer can only act on the information you give them. You’re the one with the legal liability.
Find a Safe Place for Your Financial Records
Just because you’ve mailed your tax return in doesn’t mean that you can shove every financial document to the edge of your desk and move on. Putting the documents necessary to complete your taxes into a safe place, preferably well organized, is an important step.
No one wants an audit, but sometimes they happen. If you’ve got organized documentation for such a situation, you can get through it with the minimum amount of stress and pain. The alternative may be trying to sort through shoe boxes of receipts, guessing which you claimed as business deductions.
You can also find situations in which those documents benefit you. If a client messes up his payments or another situation pops up where you need to file an amended return, having organized records can make the difference to getting more money back from the government.
Please Get a Tax Advisor
Even if you feel perfectly comfortable doing your own taxes, it’s still a good idea to have a pro that you can turn to when you have a question. The alternative is learning enough about taxes to be an expert in that field, rather than focusing on your freelance work.
Your advisor needs to be more than just a tax preparer, too: the guys at those pop-up tax preparation locations aren’t able to do much more than put numbers into a computer. If you don’t have the sort of income they expect (one job with no frills), they struggle. You want someone who’s able to answer unusual questions. It doesn’t hurt if that person can help you with business planning questions, like whether you should incorporate, as well. That means that a CPA will probably be a good bet for you, especially if you can find one who specializes in small businesses.
Make sure to make an appointment with that tax adviser after tax season ends, too. You can get a good idea of steps you can take over the course of the next year to bring down your tax obligations and grow your freelance business. It’s never too early to start preparing for the next tax deadline.