November 6, 2018 5 min apprehend
Opinions bidding by Entrepreneur contributors are their own.
My company, Freshbooks, afresh collaborated with a analysis close to survey added than 2,000 freelancers about their assignment and their challenges. Perhaps unsurprisingly, tax acquiescence emerged as a antecedent of stress. A significant cardinal of respondents preferred any of the afterward tribulations to filing taxes:
The Centralized Revenue Service recognizes the affair as a accepted botheration for self-employed individuals. According to one of the agency’s letters to Congress: “The better antecedent of acquiescence accountability for taxpayers — and the IRS — is the cutting complication of the tax code.” Elsewhere in the aforementioned report, the IRS accustomed that small-business taxpayers “face a decidedly amazing arrangement of laws” apropos compliance.
Related: Feeling Confused by the New Tax Law’s Small-Business Provision? You’re Not Alone.
This bizarre arrangement generally leads to adventitious results. Abounding who seek to accede in acceptable acceptance accomplish careless errors that anniversary them to overpay or acquire penalties. Conversely, the best adult taxpayers acquisition loopholes that abundantly abate their tax liabilities.
Our analysis begin the majority of small-business owners and freelancers accept the tax arrangement doesn’t anniversary them. There is no simple, constant tax filing action for the self-employed, which is why a majority accept to outsource their taxes to a professional.
Given all the all-overs over tax compliance, abounding self-employed professionals abstain arrest the affair directly. It’s accepted to put off tax-compliance duties until the aftermost minute, again amusement it as a all-important evil.
This agency allotment of the band-aid is a mindset shift. There are two important truths you should know.
1. You don’t charge to do everything. You’re a able in your field. You don’t charge to additionally be a tax professional.
2. You anniversary from accomplishing it the adapted way. Properly advertisement your taxable assets offers the befalling to abate the bulk of money you accord to the government. If you’re not actively managing your tax compliance, you’re acceptable missing deductions and added items that you could advantage to anniversary your basal line.
Related: 5 Tips for Finding the Tax Advisor Who Will Save You Millions
Here are a few baby but boss tips to administer in your business:
1. Accumulate a active almanac of your assets and taxes paid throughout the year.
Traditional advisers accept it accessible — at atomic in agreement of tax reporting. They acquire a abiding paycheck with taxes withheld and accept a W-2 anatomy at year’s end as a arbitrary of taxable assets and amounts already paid. Self-employed workers should re-create this acquaintance as carefully as possible.
Maintaining your own annal helps accumulate you in control. Plus, it’s accessible to do. You can actualize a simple spreadsheet or use affordable, cloud-based accounting software advised for self-employed professionals.
Related: The Freelancer’s Approach to Managing Costs and Getting Paid
2. Analyze all your business costs and clue them diligently.
Time and money are the best accepted costs for best freelancers. Effectively tracking your time usually produces added billable hours, which enables you to acquire what you’re absolutely worth. Here, too, you can use a basal spreadsheet or acquisition cloud-based solutions. Abounding options for the closing additionally can accomplish invoices to accumulate you and your audience accountable.
Tracking your time and costs has added allowances as well. You’ll be able to see how advantageous you are by activity or client. Appear filing time, you added calmly can atom patterns and assort costs that appropriately abate your taxable income. This includes the money you’re spending on advertising, business supplies, business insurance, gas, conferences, able casework and travel. In short, you’ll accept all the advice you charge to assure yourself from overpaying.
Related: 8 Tips for Setting Up a Killer Invoicing Arrangement That Always Gets You Paid
3. Hire a tax able to complete your anniversary filing.
Most self-employed professionals do not charge an accountant or bookkeeper to administer their year-round finances. Those centralized accounts roles are added adapted for baby businesses with circuitous sales-tax issues, amount or added avant-garde advertisement requirements.
However, partnering with a able at tax time is a acute move. If you’ve done the assignment to accumulate clue of your income, taxes paid and business expenses, a tax able can accomplish the absolute filing around painless. He or she additionally can analyze abeyant deductions to clue in the future, abbreviation your taxable assets for years to come.
Taking ascendancy of tax acquiescence removes one of the better barriers to abiding and acknowledged career independence. It additionally opens the aperture to alpha cerebration about added agency to aerate your success — such as analytical whether a sole proprietorship, LLC, or S-Corp anatomy makes the best faculty and how you can absorb retirement planning into anniversary model.
Related: How Entrepreneurs Can Significantly Abate 2018 Taxes by Choosing the Adapted Business Entity
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