Tax Tips For Freelancers


When you become a freelancer, you enter an entirely new world divorced from the W-2 reporting system of income for staff employees.

Welcome to the 1099-form universe. This new realm of paperwork is not daunting if you prepare yourself properly. You are basically running your own business. You’ll need to keep much closer track of income and expenses, but the end result could be tax savings greater than if you were an employee.

The concept is not too good to be true. It’s all legal under long-established Internal Revenue Service rules for business deductions. The catch? Make sure you have careful documentation and tax preparation.

You may feel inundated with paperwork–now transferred to a lot of log-ins to computer programs–but that extra elbow-grease is worth it when you realize you don’t owe money on April 15 and may even be due for a refund. You may have to pay smallish amounts in federal and state taxes quarterly, yet that sacrifice is still better than the constant bite out of a paycheck.

Your technique is running a business yourself. Your ally is a savvy tax preparer. Your discipline is careful maintenance of records of business expenses. especially when working with multiple article writers.

Your payoff is more take-home income.

Here are five general guidelines for saving money as a self-employed business operator:

1. Hire a tax preparer experienced in dealing with self-employed individuals and free-lancers — and who is available year-round, not just during tax season, to process quarterly returns.

Get referrals from friends and family on who they use and check the Better Business Bureau Reliability Report on tax preparation services at

Look for credentials. Ideally, your tax preparer should either be a certified public accountant, a tax attorney or an enrolled agent. All three can represent you before the IRS in all matters, including an audit. Also, find out if the preparer is affiliated with a professional organization that holds its members to a code of ethics. Avoid any tax preparers who base their fee on a percentage of the refund.

2. Consider incorporating yourself. Setting up a corporation may be more paperwork for yourself and the accountant, but you then have a structure to channel income through the corporation and save the most money.

Most states have an annual fee for maintenance of a corporation. The money for the fee is well-spent. You will have a corporate return filled out in addition to your personal return. The two are interrelated.

Make sure your employers pay to your corporation, not your personal self, which will add up negatively come tax time. Set up a business checking account for the corporation into which the income is deposited.

3. Keep careful records of your business expenses for the allowable IRS deductions. These include travel (car, airplane, train, lodging), communications, equipment purchases and use, meals while working and anything legitimately related to the completion of your work.

Talk to your accountant about other allowable expenses, such as charitable contributions and medical expenses. There are more than you think.

Meanwhile, keep a careful record of all income. Employers are required to report income above $600 annually via 1099 forms. Sometimes they do not issue these forms, so it is the free-lancer’s responsibility to keep track of income. Even if it’s a one-time, $50 cash payment, you must keep a record of it and report it. If you don’t, there’s a chance it can come back to bite you.

4. Set up a home office. This is a specific area in your home strictly devoted to work.  Most functions and utilities used in a home office are eligible for deductions. This is your workplace.

However, take care not to use the office for non-business purposes. There is a definite separation of work and play here. Again, consult your accountant.

5. Save your tax records. Not only is it required by law, but each year gives both you and your accountant a guide to your income track and business expenses. Better to have too much paper than not enough if there is ever an IRS audit.

Make sure you get a hard copy of tax records, as the standard is electronic filing. Also save records of your checks written for business purposes.

A good accountant is worth his weight in gold. But an accountant is only as good as his client’s record-keeping, which is well worth it come April 15 and all other tax reporting times of the year.