Freelancers have full control over their financial situation. Unlike being a full time employee, a freelancer is able to decide how much to charge a client and how many hours to work on a project. When determining how much to charge for a project, it helps to understand how to handle taxes so there is no shock during tax season.
Pay Taxes Out of Pocket
As a freelancer, you are responsible to keep track of how much income is made and what percentage of that needs to go towards your taxes. After your first year of business, it is a requirement to pay taxes quarterly by estimating how much you planning.
Know What Forms to Fill Out
The requirement is to receive a 1099 for each client who has signed a contract for work. At the end of the year, you are then required to fill out a Schedule C and 1040. Keep track of all expenses and income and make sure it is in a separate account from other income sources.
Always know what types of deductions you can take. This includes your office, mileage, purchased equipment, and health insurance. A spreadsheet is a good way to list all of your expenses as they occur throughout the year.
Keeping track of your tax information throughout the year would be beneficial to you to make your end of the year tax filing the easiest. Keep in contact with your tax advisor a few times a year also can keep you on track for the yearly filing.