Freelancing can provide you with a plethora of opportunities and favorable tax returns. These are some of the many reasons why more and more individuals turn towards freelancing for monetary gains. However, the job comes with its own share of challenges and responsibilities. If you opt for it, the whole operation of your business is your sole responsibility. Soon enough, you get swamped with work without even realizing it. It is thus advisable you make yourself completely aware of the job before jumping into it. Filing income taxes for freelance workers is an altogether “tough nut to crack.” Once you face the task on hand, only then will you realize the need for a tax preparer to manage your accounting for you.
Many online CPA platforms offer to handle your bookkeeping, manage your accounting, and file your tax returns. These professional platforms can be of great help if you become overwhelmed with your accounting and taxes. All you have to consider is whether you can afford to hire a professional tax preparer or not! Even if your business is not well-established to hire a tax preparer, you can always opt for a consultation in the meantime. The following pointers will help make filing income taxes for freelance workers online a little easier for you. Read on, plunge into the details!
Where to file your taxes online
Everything you need nowadays is just a few clicks away, so why not your income taxes too? Where or how to file your taxes online can be broken down depending on straightforward factors such as your gross income. The following are the four tax filing options for individual taxpayers.
- IRS FreeFile
For this option, you first need to figure out your gross income. Gross income refers to the sum of all earnings, profits, and wages before any tax deductions, but after business expenses. If your gross income is less than $69,000, then you can use IRS FreeFile. It is a free service that the Internal Revenue Service (IRS) provides to all U.S. taxpayers. If you are eligible for the service, then you can prepare and e-file your federal tax returns for free. There are two ways to go about “free filing:” you can either use the FreeFile software or you can opt for free fillable forms – whichever you find more convenient. If your gross income is more than $69,000, you can still use free fillable forms, but you cannot benefit from the FreeFile software.
- Free Tax Return Preparation
If your gross income is less than $56,000, then you can seek assistance from VITA (Volunteer Income Tax Assistance). For the elderly, TCE (Tax Counseling for the Elderly) can prove to be of great help. Both of these platforms are highly reliable when it comes to certain tax preparation for entrepreneurs. However, in observance of COVID-19 countermeasures, several VITA sites are currently not operating. You can use the VITA locator tool to find one that is.
- Commercial DIY Software
Another option is to make use of commercial software to file your income taxes. Gather all of the information you need to file your taxes, create an online account, and be prepared to be redirected to a secure server. The process has been made easier by the introduction of a question-answer format to assist you. It is entirely safe for you to file your taxes through commercial DIY software, and they are easily transmitted through IRS-approved electronic channels.
- Authorized e-File Provider
This is an IRS database listing all active businesses that have opted to take part in the e-filing process, and it can be of excellent assistance to you. You can visit the official IRS website at irs.gov to learn more about authorized e-file providers.
Tips for freelancers to file income taxes online
Freelancing is a fruitful yet hectic job. It entails having numerous things to handle. Consequently, time management and setting your priorities right are essential to freelancing success. The IRS provides U.S. taxpayers with various services and amenities in order to ease the process of filing income taxes for the self-employed. However, if you miss out on filing timely, then you might find yourself in deep trouble. The following are some tips to help freelance workers glide smoothly through the tax filing process. Read on, take a dive into our details!
- Calculate Gross Income
As discussed above, you can benefit from free e-filing services, including that provided by the IRS. In order to do so, however, you must know your gross income. Once you have figured it out, you can “associate yourself” with a specific category of taxpayers and check which benefits and services, i.e. tax deductions and credits, you are entitled to. You can opt for online DIY software or for a professional tax preparer to help you calculate your gross income.
- Deduct Home Office Expenses
If you are working from home, then you can write off a portion of it on your Federal income tax return. The easiest way to calculate this tax break is to make use of the Simplified method. All you have to do is multiply your total home office space by the IRS’ statutory rate, per square foot, for the current tax year. This can provide you with a good break on your tax return. Before using the Simplified method, make sure that you are eligible to use it. There are specific parameters you need to meet if you wish to opt for the Simplified method and they are not too difficult to understand.
- Keep Track of Invoices Digitally
In order to ensure that your bookkeeping is streamlined, it is of great importance you keep track of all invoices and receipts. Professional tax preparers suggest keeping both a physical and digital copy of all documents so that you can easily calculate your expense subtotals and your inflow of money at the end of the year.
- Opt for a Professional Tax Preparer
Taxes are tricky and filing income taxes for self-employed online can add to the complexity of it. So, consider hiring a professional tax preparer to do the job for you. A good tax preparer can also help you with your bookkeeping. TIP: You can always hire a tax preparer for a year or two, try to understand what they do, and then resort to free or DIY online software. Professional tax preparation does not need to be a lifelong expense for you!
Basil Agrocostea, CPA has been serving creative entrepreneurs as an accountant for over ten years. He prepares hundreds of tax returns for freelancers every year. If you are looking for someone who can keep good records of your business transactions, then consider him and his growing national practice, Agro Accounting CPA.