Freelancing Isn’t Free – The Ultimate Guide to Being Your Own Boss
Cutting ties with a full time job and striking out as a freelancer will elicit a mix of emotions from most people. You might feel elated at being able to control your own professional destiny, but also anxious about the uncertainty that comes with the self-employed lifestyle.
To get to grips with being your own boss quickly and effectively, take onboard the following pieces of advice that every freelancer needs in their toolkit.
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Take tax into account from day one
In the rush to launch your freelance career, it’s easy for certain aspects to slip through the cracks, and thinking about tax is not always a priority at this point.
However, if you don’t get up to speed with your obligations to the IRS as soon as possible, you could find yourself in hot water.
So how can you find out what self-employment taxes are all about? Well, on this beginner-friendly guide you’ll learn the ins and outs of what you have to pay and when you have to pay it. There is also guidance on how to reduce your tax liability.
The most useful tip in a tax context is to make sure you set money aside to cover your tax bill when the time comes. Don’t just dump all of your earnings into your personal account and spend every last penny, as you’ll end up without enough spare money to pay the taxman.
This is particularly crucial if you’ve previously been used to tax being taken out of your paycheck before you’ve received it.
Track expenses & keep receipts
Talking of tax, another vital aspect of being a freelancer is making sure that you keep hold of the right documentation when you make business-related purchases and incur expenses related to your job.
A deluge of different deductibles are available for self-employed people to harness, but you can only use them if you have pristine records of what you’ve spent. We’ll talk a little more about how to do this in a moment, but suffice it to say that the less organized you are in this area, the more you’ll end up paying when the tax return deadline rolls around.
Claiming back everything from the costs of using your personal vehicle for business purposes, to purchasing equipment you need to work effectively, is a possibility. You just need to know what deductibles are out there for you to grab a hold of.
Open a business account
Earlier we mentioned that it’s not a good idea to put money you earn from freelancing into your personal bank account, and that’s not a way of preventing you spending it all; it’s also about the admin side of being your own boss.
If you want to scrutinize your expenses and get a sense of your earnings over time, setting up a business bank account which you only put to use for professional purposes is wise.
With a business account, you can also have a separate payment card to take out and about with you, letting you pay directly for goods and services that are related to your work rather than putting it all on your personal plastic.
In addition, an account that’s linked to your business can limit the liability you face when it comes to the financial repercussions of your operations. This matters more for those who are trying to set up a whole firm to lead, but could be relevant for freelancers in some scenarios as well.
Seek expert advice
Whether or not you are intimidated by the prospect of working for yourself and taking on all of the financial and administrative burdens that come with this, you still stand to gain a lot from hiring a certified accountant to assist you.
CPAs are able to cater to the needs of lots of clients, from freelancers to small businesses and beyond. So from filing tax returns to tackling invoicing issues, accountants will be a boon in all sorts of scenarios.
Over time, you’ll become more familiar and comfortable with what it takes to work as a freelancer. But for the early stages, being able to call on a finance professional to aid you will minimize stress and avert potential disasters.