Paying Taxes as a Freelancer

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Freelancing: Working Out of the Box, with Help from the Web

Maybe you're just making the leap from a steady, 9-to-5 job to the sometimes unpredictable lifestyle of an independent contractor, or maybe you've been freelancing for years. Either way, managing your current work and looking for your next gig can be a daunting endeavor. Online you'll find freelancing advice, tax information, tracking and organization tools, and much more to help you find success in the freelancing world.

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Getting Started in Freelance

You should make sure that you know what you are getting into before you take the leap into the ... read more »

Finding Freelance Jobs

But most freelancers are constantly working to make sure they have enough projects lined up to pay ... read more »

Freelance Pay, Contracts, and Benefits

If freelancing is your only source of income, you are going to have to be very careful. Some online ... read more »

Keeping Track of Freelance Projects

If you're going to work on several projects at a time, or even one project, organization will play ... read more »

Paying Taxes as a Freelancer

Taxes can be more complicated for freelancers than for an average employee in a large company; in most cases taxes are not deducted from your paycheck, so you'll have to set aside a good portion of each paycheck in order to have enough to pay your taxes at the end of each year (or quarter). It is especially important for freelancers to make themselves aware of potential write-offs available to them so that they can save receipts and track expenses (especially if you work exclusively from home).

Dulcinea's Insight

Before you begin doing freelance work, talk to your accountant or financial advisor to determine how much money you should be putting aside for taxes.

Most freelancers are required to pay estimated taxes a few times a year. Check to see if you need to do this so that you can avoid being penalized come April. The forms for filing estimated taxes can be found at the Internal Revenue Service Web site.

Because you'll have to save your tax money and pay quarterly (or once a year), consider keeping those funds in an online bank account-these typically have higher interest rates than regular savings accounts because they have lower overhead costs. Two popular online banks are HSBC and INGdirect.

For more advice and Web sites related to paying taxes, check out the findingDulcinea Tax Guide.

Dulcinea's Picks

The Internal Revenue Service has a Small Business and Self-Employed One-Stop Resource that is the best (and most authoritative) place to look for tax advice if you are self-employed. Here you'll find information specific to those who are self-employed, which includes independent contractors/freelancers. This page has links to resources about the Earned Income Tax Credit, publications about your tax requirements as a self-employed person, and a section about what can be considered a valid business expense.

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Kiplinger Tax Center has resources to help you lower your taxes. This site has tips such as commonly missed deductions, a withholding calculator, an "ask our experts" section where you can seek tax advice, guidelines for choosing the right accountant for you, and more.

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