Freelancers, How to Avoid Uncle Sam?
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- MondoMorphic
I asked this question in another thread but I thought it more appropriate in its own thread.
I wanted to ask all you freelancers if you had any suggestions on how to best insulate oneself from Uncle Sam? I think I make the most of my write offs/deductions but I wonder if there are other tips for minimizing the tax-time screw-job.
What steps do you take, how much do you normally pay in taxes (total or % of income), etc?
- era4O40
Never incorporate! And, just to illustrate this point:
Payment Date Tax Payment Net Amt Start End
Check Num05/06/2009 Federal Taxes (941/944) $4643.34 04/01/2009
04/30/2009 E-Payment
04/06/2009 Federal Taxes (941/944) $4665.54 03/01/2009
03/31/2009 E-Payment
03/05/2009 Federal Taxes (941/944) $4687.74 02/01/2009
02/28/2009 E-Payment
02/05/2009 Federal Taxes (941/944) $4709.19 01/01/2009
01/31/2009 E-Payment- wtf. I'm Inc. and don't have anything like this. You must be making bank to owe this much.arthur
- We do okay. :) Why did you incorporate, man?era4O4
- Did it on the advice of our tax preparer. The biggest drag of the whole thing is the paper work, being salaried, etc.arthur
- you say that until a client sues you and goes after your personal assets.monkeyshine
- Yeah, I think you balance the fact that 'you\'re doing ok' with other stuff - I hazard a guess you're better off than many here...babaganush
- u can llc. then u dont have to worry as much about being suedgerardm
- capn_ron0
I pay a professional to deal with this for me. She looks over every receipt and bill and such and does the work for me. I highly recommend this, cause it takes the pressure off. You would rather design than figure out tax stuff, right?
- MondoMorphic0
It seems like not incorporating would be smart for avoiding taxes, but on the other hand, several of my larger clients require that their vendors be incorporated.
- wierd, being ltd. in UK helps you avoid certain taxes...also means if you're sued personal assets aren't at riskbabaganush
- is this for bankruptcy liability purposes?baseline_shift
- same with inc.era4O4
- ukit0
- arthur0
I'm incorporated and pay much lower taxes than before on similar earnings. Also limits liability.
- era4O40
Having an S-Corp, is the same way. However, if you're salaried employees, you pay a crapload in payroll taxes. In fact, we retain 48% of every dollar we earn, so it costs the company $4.00 to get an employee on the subway. Sucks. I also have a C-Corp which zeroes out at the end of the year and only pays dividends (no salaries). That company, at least, is safe from uncle sam.
- era4O40
Oh, last thing. Move out of NYC or any place that charges local/city taxes. We save $6k annual by being incorporated in NJ.
- kgvs720
Receive payment in cash only.
- Scotch_Roman0
I'm LLC. Makes the most sense for a one-man operation who's not yet pulling in six figure+ billings.
- fyoucher10
4/15: $13,420.00 (Federal)
4/15: $2,350.00 (PA State)
4/15: $2,990.00 (Local, pay the entire year at once)
6/15: $13,420.00 (Federal)
6/15: $2,350.00 (PA State)
9/15: $11,420.00 (Federal)
9/15: $2,350.00 (PA State)
12/31: $13,420.00 (Federal) (Pay before the next year)
12/31: $2,350.00 (PA State) (Pay before the next year)- Get an accountant. Don't do that Turbo-tax thing unless you know what ur doing.
- get a separate credit line or checking account that's specifically for business expenses.
- Keep all receipts and organize and sort every 1st of the month.
- Deduct as much as you can.
- Contribute the max to retirement EVERY YEAR!!!! Max that shit out. It's like free money.
- Send out all 1099-Misc by Jan 31st.That's it. I'm not incorporated or anything like that. Just have a DBA, which isn't shit really. I usually get deductions of about 40 - 50k, plus factor in Social Security and half self-employment tax.