Alden Wicker

Article / Updated 09-15-2023

You’re free! Free to sleep in until 11 a.m., free to work while your adorable toddler plays at your feet, free to . . . keep really good records of all your expenses for your taxes. Not so fun. The reality is, being self-employed can be awesome for 11 months out of the year, and then come crashing down on your head in the form of lost receipts and unpaid estimated taxes in April. Read on for what every freelancer needs to know for your taxes. Get Organized First, keep good records. Go paperless, get organized and keep track of two things: Your business income. This is your responsibility, and it is a big one. The IRS is especially sensitive about freelancers fudging their income. Yes, you will receive 1099 Forms from clients with what you earned, but only for jobs worth more than $600. So make sure you have a good recording system, like a “Freelance Income” folder in the Money Center. Your business expenses. You don’t want to miss out on deductions related to business expenses, so carefully record what you spent, the date, who you paid it to and the purpose for expenses such as: Business cards, online ads and other tools used to promote yourself and your business Business insurance Interest paid on your business credit card or business loans Lawyer fees and other professional services Rent or dues on a workspace Repairs for your computer, camera and other business-related equipment Routine office supplies like pens, paper, staples, etc. Travel costs like plane and train tickets Business meals with clients and other entertainment reasonable for your business Find the Right Tax Preparer Taxes for freelancers are complicated, so invest in a tax preparer. Look at it this way: You could pay about $300 to get your taxes done, and an accountant could easily save you $300 in fees, deductions you hadn’t heard of and more. If you decide to pay for a tax preparer, make sure they are familiar with all the ins and outs of self-employment taxes. It’s best to find one that specializes in self-employed individuals and is available throughout the year if you have any questions. Read the rest of the article on LearnVest.com.

Article / Updated 07-06-2021

Nobody forgets the first time, whether it was at their high school job at the ice cream parlor or their first job out of college, that they eagerly tore open a paycheck — already planning a shopping spree — only to find that someone had stolen a huge chunk of their money! (If you haven’t felt this sinking feeling yet, prepare yourself.) Yup, that big missing chunk went to taxes. But don’t think you’re not getting anything for it! Here are a few examples of what your taxes get you: the clean water running out of your tap, the police keeping your neighborhood safe, and the garbage that gets picked up on your curbside. You probably have an opinion on whether you’re overpaying or underpaying the government, but that’s a topic for another time. Following is an explanation of the ins and outs of taxes so you can fully understand how they affect your finances. Taxes in a nutshell Taxes are compulsory contributions to the state you live in, and to the federal government, levied by the government to pay for things that society as a whole needs but people can’t pay for individually. That includes everything from the roads you drive on to law enforcement to the salary of the President of the United States. These taxes aren’t optional and trying to hide or outrun them never really ends well (just Google “celebrity tax evasion"). Plus, 96 percent of Americans believe it’s your civic duty to pay taxes, so the best thing to do is get a basic understanding of taxes so that you can pay them accurately and on time, with minimum stress and pain — financial or emotional. Why understanding taxes is important Understanding taxes will save you when filing. Collectively, Americans overpay the government by $945 million every year. That’s about $400 per household. If you understand how taxes work, you can avoid giving too much to Uncle Sam. Understanding taxes will also save you at work. At your job, understanding how taxes work can help you save hundreds on transportation costs or childcare by having your costs of getting to work or having your children take care of taken out of your paycheck pre-tax. But more on that follows. Understanding taxes will also help you budget better. You’ll be able to more accurately plan your monthly and yearly spending if you understand how much you’ll be paying. No one likes financial surprises (unless it’s a giant windfall).

Article / Updated 03-26-2016

If there is one thing to make sure you get right on your taxes, it’s your filing status. It can determine how much you pay (or save) in taxes. Plus, it’s one of the things that, if you get it wrong, will definitely land you in a dreaded audit. (Find out what else will get you audited.) Your filing status basically expresses how you wish to be treated by the IRS, and can determine which deductions and credits you are allowed to take, which forms you should fill out and more. Don’t stay up at night fretting over this issue; everything you need to know has been compiled for you into a handy flow chart. Once you find out your filing status, you can read more about it here. Two notes before you get started: In the interest of keeping the chart simple and easy-to-use, this does not account for people who are not United States citizens. (If you are a resident alien, you might this article useful.) Also, the IRS does not recognize same-sex marriages, even if they are legal under state law, so if you are in a same-sex marriage, you should file as a single on your federal return. Read the rest of the article on LearnVest.com.