Tax Advice for Freelance Writers
Freelance writers work on their own time and schedule. They write a variety of documents, literature and articles, and can be commissioned by a number of employers at one time. Freelance writers are often paid by the hour or by the assignment. Typically, they are responsible for paying their own taxes each year, and taxes usually are not withheld from their pay.
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How Much to Expect
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It is important to calculate how much you expect to pay in taxes each year at the beginning of the year. This gives you an idea of how much to put aside, so when tax season comes, you are ready to pay and do not fall into debt with the Internal Revenue Service. How much you should expect depends on your filing status, such as single or married, as well as how much your expected taxable income is. Look at how much you made last year as a basis for how much you will make this year. For example, if you expect to make between $50,000 and $51,000, and all of that is taxable income, you can expect to owe between $6,500 and $9,000 to the IRS, depending on your filing status and the number of dependents you claim. Refer to the Resources section for a link to the IRS 2010 Tax Table to figure out the taxes for your particular income bracket and filing status.
Save
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Another piece of advice for freelance writers is to save throughout the year for your taxes. When April comes next year, you might owe thousands of dollars to the IRS. If you have not been saving, you have to scramble to quickly pay the IRS. If you are unable to pay, you can get extensions or set up payment plans, but the IRS will charge you more for being late, and will charge interest until the debt is paid off.
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Quarterly Taxes
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Many freelance writers pay quarterly taxes to the IRS every three months. These taxes are the estimated amount you will owe for the year that you pay throughout the course of the year, similar to how salaried employees pay taxes each paycheck throughout the year. If, at the end of the year, you overpaid, you get a refund. Similarly, if you did not pay enough, you owe taxes. This system is advantageous for two primary reasons. First, it allows you to pay your tax debt early, so when tax season comes, you do not owe much, if anything at all. Second, you do not have to save all the money for the entire year. When you pay it early, you won't be tempted to spend it on something else, because you don't have the money stashed away somewhere. Freelance writers might be required to pay these quarterly taxes if they do not have any other source of income that is taxed, or if they expect to owe more than a certain amount for the year, and penalties may apply if writers fail to pay by the due dates in April, June, September and the following January. Refer to the Resources section for more information about quarterly estimated taxes and to download the estimated tax form from the IRS.
Deductibles
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Freelance writers can write off a number of expenses. Tax write offs, or deductibles, allow you to subtract expenses from your total income, reducing the amount of taxable income, and thus, reducing the amount of taxes you owe. Examples of items you can write off include mileage, traveling to meet with employers and equipment you use for working, such as computers, printers, desks or books. Another deductible can be the square footage of your work space, as long as the work space is used exclusively for working, and is used almost every day you work.
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References
Resources
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