Believe it or not, even freelancers are not exempted from paying tax. Questions like, “Why should we pay when we don’t have a stable income?” “Why should we pay when we can hide what we earn since we earn online?… the government doesn’t have to know!” has been an ongoing sentiment for every freelancer around the world. But did you know that when you regularly pay your taxes as a freelancer, you have your tax forms that you can show as supporting documents when you apply for working permits, for credit or for loans, and regularly paying taxes also legitimizes your business. Although taxes for freelancers who don’t have a stable income is quite difficult, in this article we will try to guide you on a very high level about how to manage your tax as a freelancer.
How to manage tax?
As a self-employed individual, you are expected to pay this manually because it is not deducted automatically. So what do you do?
- TRACK YOUR INCOME
There are plenty of methods to tracking your income and calculating your taxes like the 25-30% suggestion by Dave Ramsey, where you set aside 30% of every check you get for every completed project. Using softwares like Good Budget that uses an envelope system – where you keep the cash for different spending categories in a separate envelope and QuickBooks that has all the features you need as a self-employed person, from invoicing to mileage tracking.
- ESTIMATE AND CALCULATE
Summarising your monthly income is the best way to manage your tax as you will have an overview of how much money you should separate from your overall income.
You should always get advice from an accountant qualified to discuss taxes in the country in which you reside.
In the USA, TaxAct Express can help you prepare and file your taxes, as it offers you the ability to easily capture all of the information from your W-2 forms with your device’s camera, track the status of your refunds, and access enhanced support with live chat.
- GET A PROFESSIONAL TO HELP
Of course, there is no more effective way to manage your taxes than asking a professional accountant for help. Finding these knowledgeable people is not difficult. You can look for available accountants online through websites like Upwork.
Accountants work in the Gig Economy too.