This is by far the most unpopular subject I will probably ever talk about. The faster you get it taken care, organized, and out of the way, the better your year will be.
A majority of people who work in the varioius creative fields have had to freelance at one time or another. Working for yourself definitely has it’s benefits, but also contains a lot of responsibility. A key part of maintaining your finances as a freelancer entail taxes.
Having the basic skills to manage your taxes in the beginning will save you a lot of pain. I would venture to say that taxes are even a benefit if you do them right, and continue staying on track.
Want an easy way to keep your records without devoting your full attention or shelling out big bucks to an advisor? Follow these simple steps below to turn your taxes and record keeping in the right direction.
Know Your Dates
Half of the battle is not know how to, but when to file your taxes. Most people who work a 9-5 job file their taxes once a year. When freelancing you should be filling and paying estimated taxes quarterly. This seems like a hassle, but in fact its actually great.
Filing quarterly is not only compling with the law (and avoiding quartely late fess) but it actually makes filling at the beginning of the year easier.
Here are the dates you will want to remember to file for your quarterly estimates:
January 15th of the next year.
Your income tax liability accrues on income as it is earned, rather than being due on April 15 of the next year.
As a freelancer if you collect several 1099-MISC forms you will certianly want to itemize deductions. In order to qualify those deductions you are going to want to have records of job related purchases.
Now I would not normally ever suggest that you keep everything on most topics. With finances though, you can’t keep enough. If you have heard the term “leave a paper tral” then thats what it means.
Keep reciepts, bank statements, check copies, etc. If you hate keeping papers like me look into some software to help you stay organzied. My preference is a combination between Evernote and Dropbox.
If any of you know me, then you are aware of how big of a promter I am for Dropbox’s service. Many of you do already use their service, but if you don’t check out my article on how and why I use Dropbox. I was not a user of Evernote as of writing the Dropbox article, so you may see some of my workflow has changed with the addition of using Evernote.
While a lot of people will a lot of peoplw will directly compare the two (Evernote & Dropbox) you just simply can’t. The two services share a lot of similarites but the way they work is different.
Up front Dropbox will make sense. It uses a file and folder system just like on a computer. Evernote uses a system involving notebooks, and notes. It is similar, but in Evernote you have a ton of data you can add to your note. For example, you can add tags, photos, audo recording, location, etc. within each individual note.
Uisng Evernote for the first time can be a little overwhemling. I highly recommend looking into The Evernote Bible and Evernote Essentials by Brett Kelly or other tutorials online to get jumpstarted. It’s a small price to pay to master the tool and save time later.
Getting Evernote set up right the first time will save you a lot of effort going around on the back end. I failed to do this and after using Evernote for a year finally figured out the workflow that works best for me.
How I use Evernote and Dropbox
You can use the two programs however you like, but this is my personal recomendation
The way I decipher between the two is by what type of piece of information I am trying to store. If it is a media file, such as a photograp, or video I tend to store that into Dropbox.
A free Dropbox account comes along with 2.5GB of storeage. There are many ways you can get more storage for free or for a small monthly or yearly purchase more storage
If I am looking to store an email, PDF, or reciept I will be processing it through Evernote. If a file has text within it Evernote has an algorithim through their servers that scans the enitre document and allows you to search through every piece of text within that document. This is very handy with PDF files.
Evernote comes with an allowance of 60MB of storage monthly for free accounts and 1GB for premium accounts ($5/month or $45/year). I recommend with starting with the freebie account and seeing by your needs if you require the premium storeage.
Do you have a tax tip to share? Please leave it in the comments below
*None of this content is considered to be taken as professional tax advice. Please consult a reputable tax advisor to insure you comply with proper state and federal tax laws.*