The 2 Things Every Freelancer Must Master To Be Successful: Taxes And Time
Often freelancers take on multiple gigs for various reasons, including to fill income gaps. It’s not uncommon for many freelancers to work seven days a week. While filling the week with multiple gigs obviously provides additional revenue, freelancers should also consider the tax implications and time constraints that determine the real value of those various jobs.
It’s all about taxes
Getting paid for side gigs means money flowing into your bank account, whether that’s driving your car for Uber or Lyft, running errands for a service, renting out a room, or working as a freelance writer. It’s a great feeling, right? Before you answer, consider how much of that revenue will eventually need to be paid for federal and state taxes. Remember, you won’t get a W-2 form for these gigs; instead you’ll receive a 1099 form that shows total income paid with no taxes deducted. A constant influx of income often means freelancers must pay estimated tax throughout the year. Those payments are made in April, June, and September of the present tax year, and then at the start of the upcoming year. If you don’t make those quarterly tax payments when you expect to owe at least $1,000 in tax on your return, then there may be penalties. On top of making these tax estimates, there are two types of taxes freelancers pay — income tax and self-employment tax. It’s a lot to remember and can mean paying out a large chunk of that bank balance. However, you can stay on top of these tax implications with some research and the right tools. For example:- Learn more about tax implications directly from the source by visiting the Internal Revenue Service’s Sharing Economy Tax Center.
- Use an online self-employment tax calculator to get a general idea of what you may owe.
- Schedule a meeting with a tax professional to discuss income and potential deductions related to these gigs.
- Maintain good records of all business-related receipts, mileage, car maintenance (such as oil changes), insurance premiums, advertising expenses, and cell phone fees.