If you haven’t done your taxes, join the rest of the world that’s dreading it too. Don’t worry, we ain’t judging you!
Doing your taxes can be stressful, especially when you’re an entrepreneur. When I started my freelance writing business, I was so focused on finding clients, taking on exciting projects, and making money, I let my first tax season as a business owner float to the back of my mind. Like, wayyy back. And while no disasters occurred as I kept the necessary forms organized, and had saved plenty of money to cover any taxes I needed to pay, there were some big lessons I learned—ones that I’m not planning on repeating this year.
UNDERSTANDING MY INCOME
As if paying taxes wasn’t already confusing enough, why not add in different types of income? As a full-time, salaried employee at Career Contessa I pay taxes differently for that income than I do for my contract, project-based work. And trust me when I say, things can get confusing—and fast. Especially when you don’t receive the proper tax forms from a client (I’ll talk more about that later).
Before I start my taxes this year, I’m going to do a quick review of this Career Contessa guide on what all those different forms mean. That way, I know exactly what I’m getting into.
TRACKING MY MONEY
When you work on a freelance basis, you’re not always going to get a W-9 from every client you worked with throughout the year. And I’m sorry to say, that doesn’t mean you don’t have to pay taxes on that income.
Because all clients pay me differently—some with regular direct deposits or checks of the same amounts, others bill monthly per project or every time work was completed—this meant that the first time I tackled my freelance taxes, I had no easily accessible record of who paid me what. In other words, I didn’t know how much income to report. So I had to really dig through old emails, bank deposits, and invoices to make sure I was properly reporting every payment I received.
Now, whenever income is deposited into my bank account, I track it in QuickBooks Self-Employed. Honestly, it’s a life saver. Because at the end of the year, I’m not relying on tax forms to remind me of what income I earned—it’s all conveniently tracked and organized for me already.
When I first started working on a freelance basis, my expenses were low and I was thinking of the experience as more of a hobby than a business. But once my business started growing, my expenses did, too. And while filling out my taxes, I was given the option of writing off my business expenses and miles. Great, right?…Except I wasn’t able to remember all the details of purchases, work trips, or miles driven.
No harm was done, but this year I’ll definitely be keeping better track of potential write-offs with the QuickBooks Self-Employed receipt capture and mile tracker. It’ll only take me a few minutes a week to get everything squared away, and I’ll be saved a big headache come April.
The one aspect of paying my first round of taxes as a small business owner that I was fully prepared for, was when it came time to pay. As a rule, I save as much of my freelance money as possible. Not only is it good for my overall financial health, but it means that come tax season, I’ll have no nasty surprises. Sure, no one likes to pay taxes, but knowing I have the money to cover whatever number is thrown my way makes things super helpful—and massively less stressful.
I typically save 50% of my freelance income to pay taxes, and since I’ve never had to pay nearly that much, I have a nice chunk of savings, when it’s all said and done.
USING THE RIGHT TOOLS
Nothing irks me more than feeling like my finances are messy.
And I can only manage so many financial accounts between banks, credit cards, and investments—which is why I really like that my Mint account (which I use to manage my personal budget and expenses), my QuickBooks Self-Employed account (which I use to manage my business income and expenses), and my TurboTax account (which I use to pay my taxes) all connect. It definitely helps alleviate some of my financial stress as everything important is all in one place.