Tax Day has passed. YESS! I’m happy to have the tax process out of the way for the year! No one ever wants to deal with their taxes, but I enjoy not being in jail, so taking care of them is a good thing. I’ve always had my taxes taken care of by a CPA while I was working a full-time job plus side hustling. It was too overwhelming and seemed scary to take on by myself. This year, I decided to take control and figure it out.
I want to note that I don’t think using a CPA is a bad thing. Professional tax accountants can save you money and help you maximize your return. They are professionals and will help you file without the stress. I’ve used them many times, and never had any problem with it. I simply wanted to experiment doing it on my own for the experience.
Not only was this my first year being self-employed, but it was also my first time filing as a married person. I was unsure how that would change things, but it wasn’t nearly as complicated as I imagined.
When you’re freelancing, you need to stay organized and prepare your finances for tax time. There were a few things I did this year go get ready:
- Had separate bank accounts for the business
- Had a dedicated money market account where 25% of all income that came in for the business was deposited. This was my tax-only savings account.
- Used QuickBooks Self-Employed- This software connected to my bank accounts and made it easy to categorize business expenses.
- Saved important documents- car registration, insurance information, and business purchase receipts.
I used TurboTax software to enter our income, business expenses, investment information, and all the other odds and ends. TurboTax walks you through each section of the Federal and State processes which was pretty straightforward. There were a few areas that were confusing, but after doing some Google research, I was able to figure it all out.
In the end, we owed a nice amount to Uncle Sam. That tax savings account came in handy and thankfully there was enough to cover what was owed.
There are a few things that I learned from doing taxes as a business owner that now makes me realize things I need to change for next year and beyond. First, I need to do a better job of saving receipts. Last year, I did an okay job, but would sometimes forget. I’ve started a folder where I’m putting receipts for things I buy for the business, and also started a folder on my computer where I can save digital receipts. I also discovered that I need to be paying taxes quarterly (I had to pay a penalty- oops.) This year, I’ll be submitting estimated taxes every 3 months.
Now that our taxes have been filed and paid, I feel like I’ve learned a lot and have a better understanding of how taxes work. Getting your taxes done as a freelancer wasn’t as daunting as I thought it would be. As long as you are organized and keep track of what’s going in and out of your business, it makes filing pretty simple.
Do you have any tips or hacks for keeping organized for tax time? Comment below =)
“People make their own luck with great preparation and good strategy” – Jack Canfield
Thanks for Reading,