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How do you guys handle tax deal?
How much do you take out of each check?
How does one not get attached by the IRS?
I am new to working on my own. :)
Give me some information please.
write off everything!!... save some for later so you can pay back,... but writing off what you can helps, save reciepts!!
When you mean write off, what exactly are you writing off?
i mean save receipts that have to do with business, like if you use your cell phone for business calls, save gas receipts if you use your car to go to meetings, any hardware, software, business lunches you buy, save those receipts so you can write some of it off again, so you won't have to pay back as much.
Whatever you do, make sure you pay your taxes. I have just been hit with a $20,000 bill for 18 months of freelance where I didn’t put anything aside for tax.
- Ouch! Sorry bro.cosmo
- I think many freelancers have been hit by this. Remembering to pay the taxes kind of reminds me of backing up data.Jaline
- ...in the sense that it is SO worth it to do it upfront and right away rather than wait it out and get hit harder.Jaline
This is pretty cool. Thanks man.
How much is required to put away from each check? 30%?
do what I do... don't pay them and hope no one's lookin'.
30% is a very safe percentage to set aside. If you do that you'll probably get money back (because you'll be setting aside 30% of your gross income, which has not had your expenses deducted).
fill this out and send the check every quarter. if you fail to do so and decide to just file annually, you will be hit with interest charges. also don't forget about state taxes as well. you can find the forms on your state gov't site.
don't fuck with the irs. if you owe them money, they will find you.
you can also depreciate your computers/peripherals etc... I'd advise hiding yourself under a LLC or S Corp... that way when you fuck up... they can't come and steal your $39 TV...
Get an accountant. It will be worth the $200 or so it will cost. If you're serious, then you have enough to deal with the first year without fucking up with uncle sam. Using some round numbers... if you make $100k in a year you're in a 25% tax bracket. If you're freelancing full time then you are self employed which means you have to pay self employment tax (medicare etc) so you can tap on another 15%. 25% + 15% = 40%!!!!!! Get an accountant and save ever receipt for everything you buy... down to bubble gum.
The problem for me was that when times were really good, I put some aside. But times become not so good, and what I put away, I had to use for luxuries like rent, food, etc.
But me and money have never had a good relationship...
In the end, though, the best way to handle my freelance taxes was to become employed and let some other schlubb deal with it.
My dad does my taxes for me.
Someday I will have to fly out into the wild and be a normal person.
Keeping your business account separate is a must. It makes accounting at the end of the year much easier. Don't be afraid to spend on business expenses. If you do you 're spending pre-tax dollars, whatever is left-over is what the Gov is going to rake. As MrBee points out we get to pay those extra taxes that employers normally pay. But having pre-tax dollars is a much bigger benefit, since the Gov gets at an employees money before anyone else.
And yes, I also would consider an accountant a must. It makes thing much easier. You just have to worry about a little bookkeeping throughout the year. Money well spent... and it is write-off.
I'd recommend a business credit card too. I buy everything business related, from computers to lunch, on one card. Makes organizing things at year end as easy as printing pdf reports (and you have a clear and clean record of every purchase).
Anything else I would need to know?
Be creative with how you spend your money. You want to take a trip somewhere, look for something biz related, so you can write-off the trip. The more you spend on your business the less you will have to pay the government. Also, have an accountant help you put whatevers leftover in retirement accounts and such.
I would strong recommend using a tax professional. Mine costs $250 and I view it as money well spent since his advice and knowledge have more than paid for that fee with additional write-offs and peace of mind.