With the end of the year approaching, there is plenty to consider with your taxes as a freelancer. Here are some things to keep in mind as you prepare for the end of the year. If it’s too late for you this year, remember these tips for 2009 and beyond.
Keep receipts for everything. Regardless of the business you are in, there may be hidden deductions. Speak to a tax professional for help with this, but you should always keep receipts, because you’ll still need proof of everything. As a self-employeed individual, you are much more likely to face audit, and these receipts will serve as proof of your honesty.
Be wary of the home business deductions. There are several different specifications around the home based business deductions. For instance, if you use your computer or office for anything other than your business, you lose the ability to deduct expenses. Make sure you speak with your tax professional to ensure you completely qualify, and be prepared with photos of your office and equipment. There are size limits on your office space in comparison to your entire home, so this is something to be aware of.
Get an Employer Identification Number. This will give you a way to separate your business and personal finances and decrease the likelihood of an audit. It will keep your social security number safe so you can give it to clients who give you 1099’s, and you can provide it to anyone you subcontract to who must report the income you gave them.
Make Quarterly Payments. To keep the IRS off your back in 2009, create a fiscal year (the calendar year is the simplest) and send estimated tax payments each quarter. Aim high so you have a lesser chance of owing at the end of the year.