Don't Forget About Taxes When You Freelance

Don’t Forget About Taxes When You Freelance

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Just completed a job on the side, got paid for it, and liked it? Congratulations! You are now a freelancer.

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Just completed a job on the side, got paid for it, and liked it? Congratulations! You are now a freelancer.
Want to do it again? Even better news — freelancing is a viable and trending way to regularly supplement your current income, fill in gaps between jobs or even make a living full-time.
Working for yourself can be liberating, but take it from someone who’s been and happily stays there, navigating your way around can be tricky. Here are some tips for making your experience a positive one.
Test the Waters
Personal satisfaction is great, but we all have bills to pay and responsibilities to uphold. If you’re considering freelancing, start picking up jobs on the side before you quit your day job. There’s a solid chance you may find that something you love simply isn’t as much fun when it becomes your work. You could discover that you aren’t willing to give up the expensive habits that your current job supports, or that you need to bulk up your savings account before you make a big change. You might learn that you need more time to develop the discipline required to freelance successfully. If you dip your toe in the waters, these are simply lessons you learn and file away; if you dive in, these can become the things that sink you.
Analyze the Cost of Living in Your Area
“Freelance” is not always synonymous with telecommuting, but the term is generally applied to workers who do their thing off-site. If you are seriously considering making freelance work all or a substantial part of your income, start paying close attention to the cost of living in your area. If you live on the east or west coasts, or in a major city, you may need to move to make freelancing a viable way to earn a living. Remember, now you can work from anywhere.
Get Smart on Tax Implications
When you are the boss, you are also the record keeper and chief accountant. If you earn more than $600 from a single source, or $400 from self-employment, the IRS wants to know about it. Freelancers are also responsible for their own social security, Medicare and other costs typically covered by an employer. Becoming an LLC or filing for “doing business as” can enhance your credibility, but carries its own tax implications. Consult a tax expert to discuss the best way to transition to a freelance career, and what records you need to keep to stay out of the audit crosshairs. My advice? Keep everything and make copies.
Finally, remember that elephants are eaten one bite at a time. Freelancing is hard. The market is increasingly competitive, the hours are long and the work is erratic, especially in the beginning. Build up your savings, take a deep breath and do a happy dance for each and every client you earn. Work fast, provide a good product, cultivate a respectful demeanor and the jobs will come. You are your own boss now, and that takes a lot of faith.

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