Tax Preparation Tips for Freelancers

If you work as a freelancer, you probably have experienced the benefits of getting your paychecks without having taxes withheld. Sure, it’s wonderful to have all of that money in hand, but you should never forget that there is one day looming on the horizon-tax day. Yes, everyone, including freelancers, has to pay taxes. If you haven’t done any tax preparation, you may be surprised when you owe a large sum of money to the IRS on tax day. If you are a freelancer, here are a few tips on tax preparation to make tax day a little less stressful.
First, you should always withhold taxes. When you get your paycheck, you probably look at all of the money you made and can pinpoint a place where that money will go without considering tax preparation. If you aren’t withholding taxes, you are going to be forced to go for months without a paycheck because you have to save up for taxes. A better idea is to begin your tax preparation the minute you get that first paycheck. As a rule of thumb, you should put aside 40 percent of your income toward taxes. That way, you’ll be able to foot the entire tax bill and maybe even come out with a little money to save.
Second, keep tax preparation in mind when you charge your clients. It can be easy to agree to a lower sum of money simply because that amount will be before taxes. The problem with that mindset is that if you don’t keep tax preparation in mind, you are making less that you should for the service you provide. Everyone in the world figures their income out with taxes in mind, and they charge accordingly. You should do the same.
If you keep tax preparation in the forefront of your mind, freelancing can be a great way to earn money. Just remember that everyone will have to pay taxes, and you are smarter to include tax preparation in your business plan.

Karla Dennis

As seen in Forbes Magazine, Karla Dennis is an expert tax and business strategist. As an enrolled agent, Karla is licensed to represent taxpayers in all 50 states. She holds a Masters in Taxation and Business Development and is the author of two books, Tax Storm and Against the Odds.

Karla, CEO of consultancy firm Karla Dennis And Associates, Inc.™, has saved her clients thousands of dollars and has been featured in various media outlets such as Forbes, MSNBC, KTLA, Yahoo! Finance, and SmartMoney, marking her as the ultimate tax expert.

As of 2014, Karla became the new host on the “Mind Your Business” radio show, KTLK AM 1150, sharing her financial and business knowledge with the greater Orange County and Los Angeles areas. As a supporter of women’s rights and issues, Karla is part of the Women Network, an organization built to educate and mentor women. In addition, Karla is the radio host for Women Network Radio, a show that aims to uplift and empower women of all walks of life.