Can you believe it's already 2020?! If you're kicking yourself for not being organized last year, now's the time to set your resolutions and get 2020 right. We've put together three simple tips to get your tax stuff right - enjoy!
Tip #1: Record expenses as they happen
As a freelancer / 1099 contractor, every time you buy something you should ask yourself: “Could this be a tax write-off?”. For a large number of purchases, the answer is “Yes!” -- a new phone charger, a bus ticket to get to a work event, a new chair for your home office.
Don't wait until tax time to sort through your plastic bag of receipts. Keeping track of expenses right away will help you save thousands of dollars at tax time (and hours at tax time!).
Tip #2: Set tax money aside every paycheck
If you earn money as a freelancer / contractor, you’re responsible for your own tax bill. That means no refund & you'll likely owe the government hundreds if not thousands depending on how much you made. Estimate your tax bill with our free tool.
Instead of guessing and just hoping you'll have enough come April, you should start setting side money every paycheck for your freelancing / contracting work. The percent should be somewhere between 10-40%, depending on your income sources and tax profile. To estimate your self-employment tax rate, use our free tool here.
Tip #3: Start making quarterly tax payments
Most freelancers and contractors should make tax payments every three months. Not only is it required by the IRS, it helps you avoid a penalty at tax time (not to mention a massive end-of-year tax bill!).
Making these payments requires a bit of time. It requires setting up an online account with the IRS and your state revenue department. You'll then need to cut a check or wire the money directly to the government every three months.
Luckily, tools like Keeper Tax make these payments on your behalf. All Keeper Tax members get free quarterly tax payments included in membership.