A Few Things Every Freelancer Needs To Know About Tax Planning

The freelance industry has grown in leaps and bounds over the years. And this can be credited to the fact that there is a multitude of ways that you can earn a living not only on your own but on your own time too. From venturing into ride-share driving, consulting, and even writing, you have a vast array of opportunities to choose from. Nonetheless, what some freelancers take for granted is their tax obligations, and this can result in paying exorbitantly priced penalties.

What you need to understand is that simply because you have not taken on any employees does not mean that you will not have any taxes to manage. On the contrary, the gig economy has varying regulations so you must familiarize yourself with your obligations. Keep reading for a few things that every freelancer should know regarding tax planning.

Categorize all business-related receipts

One of the blunders that some freelancers make is thinking that since they are not answering to any boss they cannot claim a refund for business-related expenses, but this is incorrect. What you may be unaware of is that every type of business can be eligible for deductions. Hence, you need to be meticulous about organizing every piece of proof regarding your business costs.

A few of the different expense receipts that you should save and organize include flights, hotel accommodation, business supplies, parking, and more. A pro tip that you can consider to make the organization of these receipts easier is creating a PDF that will list all the various expenses and their subsequent receipts.

Familiarize yourself with all applicable deductions

Tax deductions can be challenging to navigate if you are aware of what would be relevant to your business. Yet, what some freelancers do not know is that there is an array of aspects of your businesses that could afford them a deduction. For example, if you require a laptop for your operations and have bought one for commercial use, you could be eligible for a deduction. On the other hand, if you have constructed a dedicated home office, it could count as a tax deduction.

To make the most of these tax deductions, it is advisable to enlist the services of a tax accountant, as they are well-versed in identifying what would be applicable for your freelancing business. It is also worth noting that if you ever receive an audit letter from the IRS, your tax accountant will know what deductions can be utilized as proof.