Professional Tax For Freelancers
If you are a freelancer means you are functioning your own business. It is essential to stay on top of your competitors. As a freelancer, you are required to pay specific professional tax as approved by the government. More info about professional tax.
Things You Need To Focus While Paying Professional Taxes
- If you are making an income of more than $400 that is pay amount minus expenses, you need to file for professional tax.
- It is necessary to file the tax before the deadline that is usually the second week of April every year. If possible, you can also refer to the IRS website so that you can get an idea of the exact deadline. It is possible to file for a six-month extension, which your taxes will remain in due in October. It does not mean that you do not need to pay taxes on time. It is just the option where you can estimate and pay ahead of deadline or wait and pay interest and other late payment fees.
- There are chances for you to pay taxes several times a year. The freelancers should pay at least $1000 as taxes. They have to file taxes in the form of quarterly estimated taxes or quarterlies. The payment process involves mailing a form called 1040 ES or online payment with a cheque to the IRS once in a few months. The taxes can be paid in the form of installments before time. As you will be paying a random or guessed amount, the overpaid amount will be received as a refund at a later date. It is almost similar to the amount we receive later in the salaried job. If you do not pay the taxes of about $1000 and missed to pay the quarterlies, there are chances for you to pay the interest and penalty.
- If you have earned about $600 from a sole media organization, they will send a paper known as 1099 where you should include the taxes. You have to double check 1099 with the records you maintain. It is necessary to record all the information what you have paid till date even when you have not received 1099.
- There are several ways where you can file taxes. It is possible to pay taxes using online services or by hiring an experienced professional. When you are paying through the IRS website, it will assist by matching you with free filing options, depending on the income and various other parameters. Certain online services provide federal tax filing for freelancers with higher income and when the returns are easy (some 1040A returns and 1040 EZ returns). The state government website offers information about free filing options also.
- It is necessary to maintain a record of money spent and income received for business purposes. You need to think about yourself as a corporate. You have to track paychecks, bank statements, invoices, and receipts. One of the most common mistakes that every freelancer does is they do not keep track of the records. They consider themselves as a writer (or any freelancing profession they do) and not a business individual.
Most people do not make the payments and end up facing a difficult situation and always get scared about the IRS. Just for the sake of your business purpose, you need to maintain a log with details like expenses, the time and date, how much, and use of the expenditure. Ensure to mention specifically. You have to collect all your pass and food bills to maintain a clear record for future references. If you miss even one or two measures, there are chances for you to stick up in the middle.
Professional Tax Guide for Freelancers
You can assist yourself by tracking the deductible expenses: Equipment, professional organization memberships, and transportation are some of the common examples. It is a bit tricky to track certain things like phone bills or monthly train passes. You need to evaluate how much you wish to devote to your business completely. It is the reason maintaining a log is necessary.
Transportation, home office rent, and business meals are tricky deductibles. It is hard to deduct for meals that you had for the sake of business purpose with your friend. Transportation is also hard to track and deduct. You need to keep recording every single trips and meal you are purchasing.