Up next in How to Do Your Taxes (15 videos)
Whether you're filing taxes for yourself or a business, we'll help you make the April 15 deadline.
You Will Need
- Savings account
- Estimated tax vouchers from the IRS
- A spreadsheet program for your computer
- High-interest savings account (optional) (optional) (optional)
- An accountant (optional) (optional) (optional)
Make a second spreadsheet for business expenses, with columns for the date of the receipt, the vendor’s name, and the amount of the expense. Keep this up to date, and hold on to receipts for anything you may be deducting.
Take appropriate deductions
Familiarize yourself with the deductions you can take as a self-employed person. When you’re working for a company, the cost of doing business—like office supplies, electronic equipment, and client entertaining—is covered for you. When you’re working for yourself, those expenses become write-offs.
Set aside your taxes
Every time you’re paid, immediately take the amount of taxes you expect to owe on that invoice and set it aside it in a savings account. Keep your net income and your tax money as separate as possible—consider it money already spent, or you’ll be in trouble when it’s time to pay up.
Be reasonable about what you write off. If you want to deduct your internet bill as a business expense, but you only use the web for business half the time, then only claim half of it.
Set up a spreadsheet on your computer that has columns for the invoice date and number, the client’s name, the gross amount you were paid, the amount you’re putting away for taxes, and the net total.
Don’t be late!
Don’t be late about filing your taxes. Delays can lead to penalties and interest.
Pay your quarterly taxes. For freelancers, April 15th isn’t the only date taxes are due. You’ll need to pay taxes based on your estimated annual income on June 15, September 15, and January 15, too. Go to www.irs.gov for the estimated tax vouchers and instructions.
Hire an accountant
If you can afford an accountant, hire one. He may pay for himself in the amount of time, aggravation, and money he saves you by knowing his stuff.