2021 has been a struggle. It’s difficult to make ends meet during an ongoing pandemic where the world and how it operates as we know it has changed. Fortunately, there are many options for tax relief for people who qualify in 2021.
Our personal and professional lives often blur as freelance writers, since you might complete a few assignments during the morning at a cafe, attend a sports event or birthday party, and then resume your work in the evening. Many are drawn to the freelance lifestyle because it gives you time and location flexibility that few jobs can offer. However, you can become shackled by poor spending habits, especially if you don’t watch your money management while working. Here are a few tips on sustaining your freelance lifestyle without breaking the bank. [Read more…]
The benefits of being your own boss outweigh the advantages of working a 9 to 5 job – we’ve already established that. Sometimes, though, we might forget that there are certain responsibilities attached to being a freelancer. For sure, we KNOW these responsibilities are there, but especially for those new to the freelance business, little things might slip by you every now and then.
When it comes to taxes, the need to track your income is paramount. After all, how will you be able to declare your income and compute taxes accurately if you do not follow some one system or another?
This post is the result of a comment I saw on some forum regarding one woman talking about a client who forgot to send in his 1099 before tax time. As a result, she forgot to declare that as part of her income. The job was a one-time deal done at the beginning of the previous year, explaining the lapse. For many freelancers, one-time deals are not that uncommon, and if you are not careful, you might find yourself facing a similar situation as the one I just described.
You may be thinking, so what? Well, this just might bite you in the butt later on, when the IRS sends you a revised tax statement. If it’s a small job and it’s just one, then no worries. However, if you neglect to declare a considerable amount (or several jobs amounting to a lot of money), then you’ll end up having to pay maybe several hundreds more.
So how do you track your income?
Obviously, this depends on your personal preference. I suggest keeping separate files for different items such as receipts, bank statements, invoices, etc. Whether you use a box, a filing cabinet, an expandable folder, an Excel file, or some other software, it doesn’t matter. The bottom line is that your filing system will help you NOT to overlook any income that you make so that when you declare your taxes, you can be as error-free as possible.
FWJ readers, care to share your income tracking system with us?
Last week I wrote about how, like it or not, keeping track of tax deductions is a year-round job for freelance writers. Yes, I know. Yuck. Don’t you hate when people are part of the problem and not part of the solution? For that reason, I decided to follow up with a post about what you need to know about keeping track of those pesky deductions throughout the year.
Hang on to Receipts
First, keep receipts or invoices for anything you purchase that could even remotely be considered part of your business. Even if you aren’t sure whether your book on stress management is a deductible business expense, a savvy accountant can help you sort it all out at the end of the year.
If you have trouble managing your receipts, a service like Shoeboxed can be your best friend. This Durham, NC-based company sends you a friendly blue envelope, allows you to stuff all of your paper receipts inside, pays your postage, scans and digitizes them for you, then stores them on the cloud in an easily searchable format. Believe me, at the end of the year, your accountant will appreciate you using Shoeboxed for your receipts much more than she will appreciate you using a box for shoes.
Be Your Own Bookkeeper
Okay, or hire somebody. Either way, keep track of all of your business expenses as you go along. Don’t be like me. When preparing my 2008 tax return last year, I found myself logged into Paypal eyeballing mysterious transactions from places like “HistoryImage” and trying to remember what on earth they were for. Were they business expenses or had I bought a framed print of a turn-of-the-century preteen bicycle messenger smoking a hand rolled cigarette? (It turns out I had, but that’s a story for a different day.) If I’d taken the time every week or month to jot down my business expenses, I wouldn’t have had to face my entire sordid 2008 internet purchase history.
Expenses such as utilities are also much easier to manage if you record them as they come in rather than trying to search through your bills (and calculate percentages) at the end of the year. You don’t want to let a single business expense slip through your fingers because every expense you record means that you get to keep more money in your pocket at tax time.
Write it Down
As for my own bookkeeping, I started out keeping track of all my business income and expenses in an Excel spreadsheet. If you’re spreadsheet savvy and have few expenses, you can probably get away with simply recording every transaction on your spreadsheet. Just make sure that you note what each expense was for. By the end of the year, you’ll forget why you spent $19.77 at “Rami Campus.”
I would share my own rudimentary Excel template, but my accountant made me promise never to foist such a horrendous document on the world ever again. I did find a few income and expense tracking spreadsheets online, but all of them would require modification to suit a freelancer’s needs, so I suggest creating your own or surfing around until you find the one that works best for you.
That is, unless you don’t want to bother with spreadsheet creation. As soon as I realized that my spreadsheet was hopelessly convoluted, I moved on to tracking my income and expenses in Outright.com, a service designed with sole-proprietors just like me in mind. (Full disclosure: Outright.com is my client, though I was a user first.) A previous FWJ posts covers the ins and outs of Outright.com for freelance writers, but suffice it to say that Outright.com is a free online application that helps freelancers easily record income and expenses without the spreadsheet.
No matter what solution seems right for you, be sure that you keep your receipts and record your income and expenses throughout the year. Come tax time, you’ll be glad you plucked all of those juicy write-offs out of business expense obscurity.
Wait, what? But April 15th just passed, you’re saying. Can’t I please get a break from all this tax talk?
Sadly, no. While they’re no fun to think about, if you’re a freelance writer, tax deductions are a part of your life all year round. And trust me, you want to think about tax deductions because they’re going to save you money in the long run.
What Can I Deduct?
Almost anything you buy to use in your business can be deducted on your taxes. In the past, respectable tax payers have been able to convince the IRS that cat food, beer, and even breast implants are viable tax deductions. While you’re probably not going to convince the IRS that your new DDD’s are integral to your freelance writing business, there are plenty of deductions you can safely take:
(Just because I said that doesn’t mean you shouldn’t run all this by an accountant or tax pro before filing taxes. Please don’t substitute this blog post for advice from a tax professional.)
Office Supplies – It’s fairly easy to be a “green” freelance writer, but until the world goes entirely paperless we’ll always need supplies like printer ink and pens. Save your receipts when you jet out to the office supply store.
PayPal Fees – Do you grimace in pain every time you see PayPal bite a chunk out of your invoice? Never fear. You can get that approximately 2.9%+.30 back at tax time by writing it off as a bank fee.
Business Phone – This deduction is easy to take if you maintain a separate phone line for your business, but really, in the age of the smart phone, how many of us do that? Just a couple of weeks ago the IRS removed cell phones from their “listed property” category. While tax pros seem to agree that this is good news, the IRS hasn’t yet issued any guidance on how sole-proprietors like us should treat cell phones that we use for both business and personal purposes on our 2010 taxes. Until they do, stay tuned!
Professional Services – Do you use an accountant at the end of the year? A bookkeeper? Maybe a business coach? You used those services to help your business and you can write them off.
Professional Memberships and Networking Events – I’ve been to networking events that set me back hundreds of dollars. Somehow the fact that I’ll be able to write off those fees at the end of the year has helped me more easily swallow forking over that cash.
Mileage – If you drive your personal auto to meet your clients, note your beginning and ending mileage in a mileage log. At the end of the year, you can deduct .50/mile. Your bus, train or taxi fare is deductible, too.
Contractors – The amount you pay anybody you hire to help you work in your business is tax deductible. Just be sure to send your contractors a 1099 by the end of January every year.
Web Hosting – Though there is a great deal of debate about how to categorize web hosting on your taxes, it most certainly is a deductible business expense.
Advertising – Did you take out an ad or print up some brochures? Deduct it!
Home Office –The home office deduction can be one of the larger deductions a freelancer like us takes, but it can also trip you up if you’re not careful. Long story short, to take a home office deduction you must use a precisely delineated portion of your home (i.e. a room, a shed, a garage) as your office and for no other purpose. From there, you can deduct the amount that you pay in rent, mortgage, etc. for the percentage of your home used for business. In other words, if you use 100 square feet of your 1,000 square foot house as an office, then you can deduct 10% of your rent or mortgage as part of your home office deduction. For homeowners, this can start to get tricky when it comes to mortgage interest, and don’t even think about selling your home unless you want a huge tax headache. The home office deduction is one of those tax time quandaries that reminds us all why accountants are so invaluable.
Utilities – These go hand in hand with the home office deduction. If you deduct 10% of your rent or mortgage as your home office deduction, you can also deduct 10% of your utility bills. In my case, these amounts are usually under $20 per month, but they add up over the year.
Nothing Personal, It’s Just Business
Keep in mind when it comes to tax deductions that you can only deduct the portion of anything – your utilities, your PayPal fees, etc. – that you use for business. The IRS tends to frown upon sloppy bookkeeping and letting your personal finances bleed all over your Schedule C business taxes. Because of that, next week I’ll provide answers to the age old question, “How on earth do I keep track of all these tax deductions anyway?”
There are thousands of tax deductions out there. As a freelance writer, do you regularly take any tax deductions that didn’t make this list? Share with your fellow writers so we can all keep Uncle Sam out of our back pockets.
Jennifer Escalona is not a tax professional and this post should not be taken as tax advice. She’s just a freelance writer who has battled the tax laws and won.
At Freelance Writing Jobs we strive to provide you with the best information possible about starting your freelance writing career. With so many posts offering tips and advice, it can be hard to find useful information that’s not on the front page of this blog. Since we receive a lot of email asking for tips on getting started as a freelance writer, how to set rates and more, I thought it was time for a static “Frequently Asked Questions” page. If you’re starting out as a writer, or just want a refresher course, use this handy list as a one stop shopping experience for all things freelance writing.
Warning: Work in progress. This list is by no means complete and will receive periodic updates, so do check back often.
Freelance Writing Jobs: Frequently Asked Questions
How to Find Freelance Writing Jobs
- How to Land Your First Freelance Writing Job
- 43 Places to Find Freelance Writing Jobs
- 30 Types of Freelance Writing Jobs and How to Get Them
- Web Content Sites: What They’re Saying, What’s True and What’s False
- Corporate Freelance Writing Jobs: Five Places to Find Them
- How to Find the High Paying Freelance Writing Jobs
- How to Use Discussion Forums for Writers to Find Freelance Writing Jobs
- 47 Places to Find Telecommuting Jobs
- 10 Ways to Get Your Freelance Writing Foot in the Door
- 50 Places that Hire Freelance Writers
- 10 Best Job Search Sites
- 30 Types of Freelance Writing Jobs and How to Get Them
- Freelance Writing: Before You Get Started – Research!
- 5 Ways to Find Freelance Writing Jobs Using Twitter
- Why You Should Consider Cold Calling to Find Work
- Top 10 Freelance Writing Job Red Flags
- Finding the Freelance Writing Jobs that Are Best for You
- Pitch to the Hidden Places that Hire Freelance Writers
Freelance Writing Rates
Not sure how much to charge? Check out the freelance rate calculator over at Freelance Switch.
- Where the Writing Money Is
- Set a Freelance Writing Rate Equal to the Task
- How to Turn a Low Paying Client into a High Paying Client
- Who Sets Your Freelance Writing Rates?
- Preparing Yourself for Better Freelance Writing Rates
- Figuring Out a Good Pay Rate for Writing
- Taking Baby Steps for a Better Pay Rate for Writing
- Should You Include a Rate Quote with Your Cover Letter
- What Does it Mean to Work Smarter Not Harder?
- Why You Shouldn’t Ask for a Raise
- On Rates and New Clients: Does it Ever Make Sense to Make a Starting Rate?
- How to Land Repeat Clients that Pay Well
- 8 Reasons You’re Not Landing the High Paying Freelance Writing Jobs
- Kill Fees: Not a Halloween Tale
- 6 Tips for Asking for a Raise in Your Freelance Writing Rates
- 5 Things to Consider When Discussing Rates With Other Freelance Writers
- I’m a Professional – So Pay Me Already!!!8 Reasons You’re Not Getting the High Paying Freelance Writing Jobs
- 5 Tips for Moving Away from the Easy Gigs to Land More Lucrative Opportunities
- A Lower Bid Vs. Selling Yourself Short
- 5 Tips for Deciding if You Should Raise Your Rates
- Freelance Writing for Beginners: How to Set Your Rates
- Why Are Freelancers Negotiating Rates Anyway?
Cover Letters, Clips, Resumes, Job Applications and Query Letters
- Query Letter Writing: Dissecting a Successful Query Letter
- How I Landed My First Freelance Writing Job Without Clips
- 5 Things to Do Before You Query
- Freelance Writing Experience: Does it Matter Where Your Clips Come From?
- Query Letter Writing: Querying Out of the Box
- Top 10 Freelance Writing Job Application Mistakes
- 8 Types of Freelance Writing Pitches or Why You Didn’t Get the Job
- Rewarding Your Long Term Freelance Writing Clients for their Customer Loyalty
- What Lousy Customer Service Can Teach You About Good Customer Service
- What My Neighbor’s Teen Can Teach You About Customer Service
- Customer Appreciation Lessons from Barnes & Noble
Marketing and Networking
- Freelance Writing Marketing and Promotion: How Much is Too Much
- Do You Know What You’re Selling? Successfully Marketing Your Freelance Writing
- 5 Reasons Not to Have a Cookie Cutter Elevator Pitch
- 5 Tips for Creating an Elevator Speech
- 10 Unique Places to Market Your Book
- 5 Reasons Online Relationships Are Important for Freelance Writers
- 5 Reasons Offline Relationships Are Important for Freelance Writers
- How Much Would Your Freelance Writing Business Pick Up if You Got Out from Behind Your Laptop?
- 10 Reasons Why Face to Face Networking is Important for Freelance Writers
- Introducing Yourself as a Freelance Writer Without Sounding Like a Smarmy Salesman
- The Freelance Writers Guide to Blogs and Blogging
- The Freelance Writer’s Guide to Twitter
- The Freelance Writer’s Guide to Facebook
Tools and Resources
- Understanding Freelance Writing Rights and Usage
- 31 Free Online Writing Courses
- 20 Places to Find Online Courses for Writers
- 45 Free Things for Writers
- Where to Find Free WiFi Hotspots Around the World
- 49 Free Online Reference Tools for Freelance Writers
Freelance Writing Markets
- 75 “Write for Us” Pages
- 40 Freelance Writing Markets Paying $100 or More
- 40 More Freelance Writing Markets Paying $100 or More
- 50 Submissions Guidelines Pages
- 11 Cooking, Food and Drink Markets
- 19 Parenting Markets
- 21 Poetry Markets
- 15 Greeting Card Markets
- 11 Environmental Markets
- 15 Places for Freelance Writers to Find Magazine Markets
- 6 Tips for Finding New Freelance Writing Markets
Freelance Writing Taxes
- Tax Tips for UK Freelancers
- What Every Freelancer Needs to Know About Taxes
- How to Solve Freelance Tax Problems
- When a Writer Needs to Hire a CPA
- Easy to Forget Income Tax Deductions
- Introduction to Quarterly Taxes
- 3 Ways to Reduce Your Freelance Writing Taxes and Help Yourself
- Tax Tips for Freelance Writers
- 20 Tax Deductions for Freelancers
- Year End Tax Tips for Freelance Writing Businesses
- When Your Freelance Writing Business Gets Audited
Freelance Writing Clients and Business Tips
- Should You Trust Your Freelance Writing Clients With Your Personal Information?
- Client Vs. Employer: There’s a Difference
- 3 Hints for Giving Value with Your Freelance Writing
- 5 Options for Avoiding Paypal Fees and Keeping all Your Freelance Writing Pay
- 3 Things to Consider Before Outsourcing Your Freelance Writing Work
- 5 Rocking Good Business Practices for Freelance Writers
- 5 Tips for Asking a Freelance Writing Client for More Work
- 5 Reasons Freelance Writers Should Keep Regular Business Hours
- 5 Reasons Not to Burn Your Bridges
- 10 Tips for Setting Up an Office
- 10 Hints from Transitioning from Freelance Writing to a Freelance Writing Business
- Identifying the Reasons Your Freelance Writing Business Isn’t Growing
- 10 Hints for Transitioning from Freelance Writing Job to Freelance Writing Business
- Freelance Writing Clients: The Difference Between Friends and Friendly
- 6 Tips for Receiving Feedback from Your Freelance Writing Clients
Other Freelance Writing Topics
- 40 Lessons Learned in 10 Years of Freelance Wriitng
- The A, B, C’s of Freelance Writing
- 7 Great Places to find Interview Subjects
- 19 Grants for Writers and Other Creative Types
- Technical Writing: What’s it Like?
- Freelance Writing Opportunities in SEO Content
- Freelance Writing COmmunities: 10 Questions to Ask Before You Join
- Contracting for Writers 101
- How to Find Interview Subjects for Your Blog Posts and Articles
- 4 Measures to Put in Place So Your Freelance Writing Clients Won’t Rip You Off
- The Dark Side of Freelance Writer: When Clients Don’t Pay5 Forms of Passive Income for Freelance Writers
by Thursday Bram
When something goes wrong with an employee’s taxes, her employer is often responsible when everything is said and done. For freelancers, though, no employer is going to take the time to correct errors. That means that you have to take responsibility for making sure that all of your paperwork is in order and, if it isn’t, that you take the right measures to keep the IRS happy.
Contact the IRS
Staying in touch with the IRS can simplify most of the problems a freelancer can face when it comes to taxes. In most situations, such as late filing, the IRS automatically assumes the worst. In the case of a missing return, for instance, the IRS’ standard policy is to create a substitute tax return based on your expected income. The IRS won’t take time to figure any deductions, though — they’ll just charge you will the full tax obligation for the income they think you’ve earned and charge interest and penalties based on that amount. The only alternative is to contact the IRS if, for any reason, they haven’t received your payments or tax return.
The IRS makes it easy to find information and make contact. You can call and ask tax questions Monday through Friday (freelancers should use the toll-free business help line at 800-829-4933). You can also get face-to-face help at local IRS offices.
Talk to Your Clients
More than a few issues with freelancers’ taxes can be traced back to an incorrect Form 1090. If you can get your client to file an amended form with the IRS quickly, you can simplify the situation. If you do not receive an amended form from your client, even after contacting him via certified mail, the IRS can correct it — but will only do so if you can provide evidence (such as a certified letter) that you have attempted to resolve the matter on your own. Getting your client to amend their paperwork is generally a faster solution.
Know Your Rights
As a taxpayer, you always have the right to appeal a problem with the IRS. At every step of the IRS’ process for handling tax problems, you can get help, and if it continues to escalate, there organizations meant specifically to help you. If you can’t handle a matter through the normal IRS channels, the Taxpayer Advocate Service may be able to help you with the situation.
If you’re making the switch to freelancing, it’s easy to miss some of the details that go along with completing your taxes. There are some major differences in the paperwork if you’re working for a company or if you’re self-employed. While there are plenty of ways to save money on your taxes or even make them easier to complete, there are some nuts and bolts that every freelance writer should know.
The Question of Quarterly Estimated Tax Payments
As a freelancer, you don’t have a boss — which means that you don’t have anyone handling your taxes during payroll. You’re completely responsible for making sure that your taxes get paid. In the US, the IRS has created a system where anyone who is self-employed submits tax payments every quarter. The amount is based on how big your tax liability was on last year’s tax return, although if you’re making more money this year, the IRS expects you to bump up your payments.
Not getting those payments in on time can result in penalties, although some freelancers may have a little more room to maneuver. If you have a job where a certain portion of your paycheck gets withheld for taxes or it’s your first year freelancing full-time, you may have a little more flexibility.
Watching Out for Form 1099
Any US-based client you work with probably will be reporting the money they’ve paid you to the IRS with a Form 1099, which is used specifically to report income paid to anyone who is a contractor or otherwise self-employed. You will receive a copy of any Form 1099 submitted by the beginning of March, so that you can use it to complete your own taxes. Unfortunately, it isn’t impossible for a client to send you an incorrect form (or forget to send you a form entirely). It’s important to double check each Form 1099 against your own records to make sure that the information is accurate.
Get Every Deduction You Can
As a freelance writer, you can write off any necessary business expenses as deductions on your taxes. Whether you had to pick up a new computer or you pay for a phone line for your business, you can reduce the amount of money you are expected to pay in taxes by claiming these deductions. You can even claim a portion of your home expenses (like your utility bills and rent) as costs of doing business as long as you have a dedicated home office.
What’s Coming Next
We’ll be getting into the gritty details of claiming taxes, reducing the amount of taxes you have to pay and the typical tax problems freelance writers can run into. However, I need to offer a disclaimer: it is important to remember that everyone’s tax situation is different — in order to make the right decisions about your own taxes, it’s important to talk to a tax professional who can walk you the specifics of your own tax situation.