A reminder that even if you’re not financially perfect…you’ll still be okay.
Since I was 19, I’ve had at least two jobs at once. Since those jobs involved, acting, writing, and other random 1099 tasks, my taxes have been difficult for 16 years.
I’d love to say I’ve learned a fool-proof method to make taxes easy. That all my receipts live in a well organized folder in an even better organized drawer with all my freelance accounting.
That would be a lie.
My monetary organization is piss-poor, my invoices mysteriously numbered, and tax time always feels like a guessing game. So why would I write any advice about taxes?
Well, there are a lot of other creatives out there who don’t keep crystal clear records and I want to let you know — it’s not the end of the world. In my 16 years of crazy taxes, I’ve never had a problem, and never got caught with a huge bill at the end of the year.
To help give you hope that freelance taxes don’t have to be a nightmare, here are 3 half-assed tips to make sure your taxes are done right (even when you hate spreadsheets like the plague).
Note: I’m clearly not a tax professional. These are just things I’ve used in my real life, but if you have any doubts about your own finances, please turn to someone with real experience.
Save Your Money
It’s fun to get a paycheck and even more fun to spend it. But you have to keep taxes in mind at every turn. That doesn’t mean you need to save every penny, but put some aside, ideally 15 percent.
Have I always put aside 15 percent. Hell no. Turns out rent has to be paid monthly, so sometimes future taxes need to go to the current roof over my head. Instead, I set a monthly deduction from my checking to my savings and put a significant amount aside when I get bigger checks.
What about quarterly payments? Ideally, you’d make quarterly payments for federal and state tax. This breaks up your tax payments into easier chunks and lets you avoid any late payment penalties. But, sometimes quarterly payments just don’t happen.
Maybe your income is really inconsistent. Maybe you moved to another state. Maybe you really needed the money you made and couldn’t make a quarterly payment. All these things are possible. In my life, I’ve missed many a quarterly payment and everything turned out fine.
I’ve gone quite a few years paying zero quarterly taxes and paying it all at the end of the year. Is this the best idea? No. A few times, I was charged a penalty. But the penalty was pretty small and the IRS didn’t seem to care…as long as what was due at the end of the year was paid in full and on time.
Again, this isn’t the best way to do things. The best thing is to keep perfect records, save the right amount of money, and pay exactly what you need on time, every time. But working freelance can be hard as hell and certain things will fall through the cracks. I just want you to know if quarterly taxes fall by the wayside, you’ll be okay.
These experiences come from when I made between $40,000-$60,000 a year, for context. If you make a lot more, making more accurate quarterly payments is a better idea.
But, that gets back to the main tip — save your money. As long as you keep something aside for taxes, you’ll be okay.
Note: Every state has different rules, so be sure to get what you need for your state squared away in addition to what the Feds need.
Go Through Your Bank Statements
Did you keep perfect receipts of everything you paid for last year? My guess is no. That’s okay, just look at your bank statements instead.
You won’t be able to itemize purchases like you can do with a receipt (as in, say you spent $100 at Target. If you can only claim $20 of that for business purposes, you’d need the receipt to show that itemized list, so the IRS can see exactly which Target item was a write off-able expense). But the biggest expenses will still be there for you to claim.
Claim a lot! Did you buy a book? Well, you’re a writer, that’s research. Keep track of cabs, business dinners, even streaming services. I mean, how can you be a writer if you don’t watch the Mandelorian? That Disney+ expense is imperative for your business!
This isn’t about lying and finding loopholes. These types of expenses are allowed and you should take them!
Hire a Professional
This seems like a cop out, but it’s important. I’m not saying you need to hire a full-time accountant to keep track of your finances. But hiring someone to help you with taxes, even just once, will save you a lot of money in the long run.
Be sure to work with professionals who specialize in freelance tax returns in your state. There are people who work specifically with actors, writers, creatives, and anything else you’d like to call yourself. With a professional, you won’t have to worry if you’re writing off too much or too little. And they’ll be able to advise about next year’s quarterly payments or any other questions you might have.
I did my own taxes (when I had two part-time, steadily taxed jobs) and owed $3000 from my $30,000 salary. The next year, I went to a professional and got money back at the end of the year. Since then, the one-time fee for help has saved me lots of cash and headaches.
I know that paying for a tax person can seem tough. The most I’ve paid was $700 (for taxes for me and my husband). That’s not cheap, but I certainly would have lost that in taxes and general worry that I did something wrong.
These tips aren’t life changing. But if you feel like the only freelancer who doesn’t have every duck in a row tax-wise, you’re not. And even if you aren’t an organized finance wiz with a spreadsheet for every expense, it’s okay. It happens. But you’ll make it through this tax season and the next, getting a little bit better about it every time.
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