Tax Tips for Freelance Workers
Are you getting paid as an independent contractor? If so, itÃ¢â‚¬â„¢s likely that taxes are not being taken of your pay. Depending on how much you make you could be hit with a painful tax bill during tax season. Therefore, it is vital that you plan ahead.
First, take all the possible deductions that you legally can take. Consult with a tax professional so they can find the necessary deductions.
Second, make sure to keep accurate records by saving all of your business related expenses receipts, paychecks, electronic pay-stubs, etc. They will be helpful for your tax professional when preparing your taxes and may be needed if you are audited.
Third, if you make a large income from you freelance work, a large tax liability may be in the midst. To make sure you arenÃ¢â‚¬â„¢t underpaying taxes increase your withholdings from any taxed income that your receive from other income such as your full time job or spouseÃ¢â‚¬â„¢s paycheck.
Fourth, you can save a percentage of your freelance income each month for taxes. Put aside a percentage of your income each month specifically for the purpose of paying your annual tax liability. So when your tax professional calculates the tax due on your tax return you will have the money set aside. 20% is the recommended amount and usually enough to cover their tax bills but it also a good idea to consult with a tax professional how much you should put aside.