While Tax Season is still many months ahead of us, it is important to stop several times through the year and evaluate where we stand. As a warning, I am not a tax specialist and never would I claim to be. I am just as lost as the majority of you. Nevertheless, these are the things I take a look at around this time of year to be best prepared for the coming months ahead of me.
As an online freelancer, you have the benefit of being able to write-off most, if not all, of your expenses. It is important to be sure you are on track with keeping record of these. Personally, I keep receipts for office supplies and things I know I can write-off in an index card box and by now they are all stuffed in there. But, they are all in one place and I know where to find them come next year. However, I am not very good when it comes to keeping record of things like my internet bill expense. So, I will need to go back and print off all the missed bills and make sure I have them all in one place.
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Tracking income can be a hassle for me. Most of mine comes in through PayPal, so I have a record there already. But, it isn’t well-organized and can be hard to sift through. For me, I feel no need to be high-strung about keeping income tracked. Even just writing each pay amount and where it came from into a notebook or on an excel spreadsheet will be fine. You should receive 1099s next year for any company you earned over $599 with. However, some companies choose to send 1099s regardless of how much you made. I received one last year for $37. Although many times you will be told you only have to report what is recorded on a 1099–technically that is not true. IRS requires you to claim ALL MONIES earned. I would rather not worry about an audit than to save a few bucks in taxes. Plus it helps show my true income for when I am ready to buy a new house ;).
Plan Your Tax Preparer
In the past I have used online software. I am a bit of a cheap skate and couldn’t stomach handing over a hundred dollars to H&R Block again and watch them do exactly what I can do from home- with the right software. I have used both TaxACT & TurboTax and have been thrilled with both. I like that I can insert my information into both and several other online options and see what they are showing as my return before deciding and paying for the service! This helps me maximize my return. However, because of my husband’s new job we will be hiring a professional tax consultant this year and I feel it is a good time to go ahead and make contact with whomever I choose. I want to make sure I am lined up with their suggestions and be prepared!
Have you been setting part of your freelance earnings aside? Well, I personally do not have to set any money aside thanks to the value the government has found my children to be! I generally still receive a return and can keep 100% of my earnings! But, if this is your first year as a freelancer and you are not sure where you stand- most people default to setting aside 30% of their earnings to be prepared in case they owe taxes. If this is not your first rodeo- then last year probably gave you a good idea of what to expect. If you are unsure- the best thing you can do is contact a tax consultant who knows your state laws and can look at your personal situation to give you the best advice.
While taxes are not due until April 2012- it is an ongoing and yearly project being prepared and organized. Otherwise, the deadline will come faster than we want and the stress will mount.
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I am currently in the works of preparing an open Question/Answer Session where we will be discussing Taxes! I am expecting to have at least one tax professional who also works at home to answer any general questions you may have! Stay in touch to learn when the big day will be! I will be announcing here on the blog as well as on Facebook and Twitter.