Now we're going to talk about the most thrilling topic, preparing for taxes, taxes are not exactly every freelancers jam. But they do mean that you've made some money and now you owe a little money, so let's talk about the essential tax forms that freelancers need to be familiar with in the US. You need to send every client a W9 form, this is the forum for 1099 contractors. Any vendor over $600 needs to get a 1099 tax form every year so that they can submit their taxes If you're paying other people or companies over $600 a year. Your company also needs to collect W9s from your vendors and send them 1099 by January 31 of the following year. In order to structure your financial records properly, you'll need to set up accounts and sub accounts in your bookkeeping system. Spend time up front setting up neat and orderly account titles with numbers for your major income and expense categories, we'll go through some of the options. You may not need all of these that are suggested, but there are food for thought, as you get set up, you need to outline your income categories. These could be product income, service, income, rental, income membership, income, fee, income, grant, income or some other label. If you're getting income from another source and then you'll need to set up your expense categories, one of the biggest can be outside services. This is for people you hire to get work done, then legal and professional services, this is where you categorize your expenses for lawyers and accountants. If you have expenses for an office, you might have office rent and office expenses associated with running the office have an account for ongoing education. Yes, you can likely right off this course, but you should confirm with your accountant, have a categories for research, phone, internet, software, postage, printing, gifts, meals and entertainment. Travel, transportation, tolls, parking, commercial liability insurance, wages, retirement savings, health insurance, life insurance, mortgage and mortgage interest. If you own the building and real estate taxes, if you own the building, make sure you have a category for each expense and that you can group like expenses together. Be careful about credit cards and loans, if you don't have the cash budgeted to buy something, just don't buy it. Be wary of running up credit card or loan balances that you can't guarantee that you can pay off in the same month. Be wary of loan programs that are easy to apply for, but don't do a great job of explaining the terms and details, there's likely a catch. You need to know that you can pay off the loans on the timeline that's required to minimize interest charges and fees and avoid all kinds of late fees. Every additional account you open is kind of a pain in the neck for your accountant. So keep it simple, it's important that you keep receipts, your bookkeeper and accountant will thank you for being organized. This could be in a bag or a box or you can lay them out on paper so that they are very nice and organized and you can always refer back to them. You need to reconcile your bank accounts regularly with your bookkeeping system. Most freelancers have pretty simple bookkeeping needs and can reconcile envoys pay bills once or twice a month. Connect all of your online banking accounts to accounting software so that your transactions will download automatically. You can download and save your monthly statement from your online banking account to share with your accountant or book keepers that they can double check your work. Make sure your online accounting program has all of your transactions and put them in the proper categories at least monthly. If you're diligent about doing this you'll be able to run your major financial reports just about any time and they'll be accurate, plus you'll be ready for major tax deadlines. Keep a calendar of important dates for taxes when you keep a calendar of key dates instead of processes by which you'll be ready to pay on time. You'll be on time every time, automate everything you can and make sure you're saving for tax payments every month, set up automated processes whenever you can. This will make it easier for you your bookkeeper and your accountant, you can set up auto billing to pay your bills and to ask clients to pay you whenever possible. Some businesses are required to collect a sales tax, usually, you need to register with your state or local government to make sure that you have an account for paying your sales tax. Collect sales tax with every transaction according to your required tax rules for your location and industry. And make sure you're saving those funds in a special place so that you can make those payments on time. You'll also need to pay your income taxes for businesses like c corporations that have to pay their own taxes, the IRS expects quarterly filings for most businesses. States may differ in their policies and timing, if you're a freelancer that is paying yourself through payroll or paying others through payroll. You'll also want to set up your taxes and withholdings to be withdrawn automatically from your account set up with a payroll provider. A lot of freelancers like to use Gusto, Justworks or other popular options, these guidelines are using a US example. So you should check your local jurisdiction to make sure you understand the tax requirements where you're located. Consult with your accountant who can come up with really interesting strategies to manage your taxes effectively taxes might not be your favorite thing to take care of as a freelancer. But they mean you're growing and those taxes get poured back to make your community better.
