As the Gig Economy continues to expand, freelancers are an ever-growing presence in the global work force. Estimates show that 57.3 million Americans are involved in freelancing, which makes up over 36% of the American workforce. These same studies show that by 2027, the majority of the workforce will be freelancers.
While the positive reasons for freelancing seem quite apparent, such as setting your own hours, projects, and time off, one of the biggest challenges that many freelancers fail to consider is their tax burden. No one does your payroll except for yourself! It’s easy to forget to file quarterly taxes and even easier to miss out on important deductions that you qualify for. If you recently began working for yourself, here are a few tips on how to save yourself significant headaches and help you love your job even more than you already do.
1. You Should Talk to a Certified Public Accountant
It’s easy to see why many freelancers love independence that their profession brings. But unless you have a financial background, it’s important to get a tax professional’s help. Talking to an accountant will save you tons of time and can mean thousands of dollars of difference at tax time. Though there are certainly DIY methods, it’s important to sit down with someone who knows tax law and can guide you through the benefits, challenges, and responsibilities for working for yourself. Just as freelancers are hired for their subject matter expertise, freelancers should consider hiring a CPA to work for them.
2. Get a Grip Through Bookkeeping
Once you sit down with an accountant, it’s much easier to be confident in the financial future of your business. Rather than weeks of wasted time digging up receipts, spending unplanned money on overdue taxes, or facing confusion about financial, it’s valuable to have a CPA on your team to empower you with proper bookkeeping skills. Having a great bookkeeping team enables businesses to grow wisely, without having to take wasted steps backward to correct past financial mistakes. Just as a CPA can help make tax time easier, a bookkeeper will make the months in between much more manageable.
3. Remember to Pay Your Taxes!
One of the biggest areas that we’ve seen impact freelancers is recognizing their tax burden. The Tax Cuts and Jobs Act of 2017 made many changes to existing tax law for small businesses which can make a significant difference for freelancers. We’ve seen the failure to pay taxes put the brakes on a very successful operation very quickly. If you’re a freelancer, it’s a wise step to create a tax plan with your CPA for the upcoming year, including what your estimated quarterly tax payments should be. Your taxes will likely be your largest expense of the year, so putting in the time to plan for them in advance will pay significant dividends for your business. Additionally, make sure you keep your CPA informed of any changes in your business, such as bringing on a new employee, purchasing office space, or other major changes.
We believe the data that says that the growth of the Gig Economy is here to stay. We’ve seen many individuals strike out on their own and carve out an incredibly successful niche in their industry, all while enhancing their quality of life. If you’re a freelancer, we’d be honored to meet with you and review your business plan, help you set up a proper tax plan for your upcoming year, and even handle your regular bookkeeping so that you can focus on running and growing your business!