Working A Freelance Job? What To Know About Paying Taxes
Have you made the shift from a salaried job to working freelance? If so, this may cause you to feel a bit stressed about how you handle your taxes. You no longer have to enter your W2 information and see how close your tax withholdings were to your actual taxes owed, since you likely have not paid any taxes throughout the entire year. Here are some tips that will help you for filing your taxes as a freelancer.
Learn About Paying Taxes Quarterly
If you are good at saving money, you may think that you can pay your tax bill all at once when they are due by April 15th. However, this could end up actually costing you more money by doing it this way. That's because the IRS will assess a fine for underpayment of taxes during the year. What you'll need to start doing is paying your taxes each quarter in order to avoid these fines. This can be done by figuring out how much in taxes you owe from the previous quarter, and making a direct payment to the IRS on their website.
One thing to keep in mind is that it's possible that this tax penalty will be waived for your first year as a freelancer, especially if you did not owe any taxes the previous year and this is your first time figuring out your freelance taxes. For future years, as long as you pay the equivalent of what you owed the previous year, you should be good.
For example, if you owed $10,000 in taxes your first year as a freelancer, as long as you pay $2,500 in taxes each quarter, you will be covered. If you make less than the previous year, you can expect to get a tax return rather than owe taxes.
Have Your Spouse Withhold More Taxes If Filing Jointly
If you still have concerns about paying taxes each quarter, there are some other ways to make sure that you are covered. If you are married and filing a joint tax return, you can always have your spouse have more taxes withheld from their paycheck. Those extra taxes paid will go towards what you end up owing, making your tax burden at the end of the year easier to handle. Your spouse can have their taxes withheld as if they were married and filing single with no allowances to maximize the taxes that are taken out, even if you do not plan to file taxes in that way.
Meet with tax preparation professionals like Christopher Bush CPA for more tips on how to handle your freelance income taxes.
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