For many writers, math is not a strong suite. Creativity comes easy, but when it comes time to worry about taxes, writers often run the other way. The danger that goes along with freelance writing is the idea that you do not get a formal paycheck. While a traditional job will take care of the taxes for you, in general, freelance writing probably won’t. In other words, it’s in the hands of the writer to set money aside for taxes.
Now to make things even more complicated for those who despised math growing up: there are different types of taxes that you have to pay. Consider the two types of taxes all freelance writers should be saving up for before April hits:
Terms All Freelance Writers Should Know
- 1. All workers have to pay income tax.
Believe it or not, many freelance writers begin making money with the assumption that they don’t have to pay income taxes. They assume that somewhere on the other end of the transaction this was taken care of. Unfortunately, these writers learn the hard way come tax time. Everyone has to pay income taxes whether they work for an employer or work for themselves. It is recommended that all freelance writers set aside a chunk of their payment so that they are prepared when April rolls around. If you’re wondering just how much you will owe, visit the H&R Block tax calculator.
- 2. If you work for yourself, you have to pay a self-employment tax.
This is the tax that blindsides most writers. You are considered an independent contractor if you are a freelance writer, so you must fill out a 1099 form that details the finances of your “business.” This tax is generally $14 for every $100 you earn. If you want to get specific, it’s 15.3% of your yearly earnings. It may sound like a lot, but rest assured you do get perks.
Tax Breaks for Freelance Writers
If you’re an independent contractor you have the ability to write things off come tax time. In other words, you can claim your expenses. Anything you need for your business, or your freelance writing career, is tax-deductible. If you needed to buy a new laptop in order to do your work, you can write that off. If you had to drive to a seminar to give a presentation, save the gas receipt and write that off. In the end, this can save you a ton of money.
It may seem like you owe a lot as a freelance writer, but it all evens out in the end. After all, you get that initial big paycheck whereas most employees do not. It’s also important to remember that if you do not abide by the tax laws you will find yourself in a lot of expensive trouble. Follow the rules and you’re sure to get by just fine.
Sarah Norris writes for one of the leading financial advice websitesCreditCardCompare.com.au and writes on topics ranging from business credit cards to balance transfer calculator. Use this to help you get ready for tax time!