4 Tax Tips for Freelance Writers in 2021

As a freelance writer, your taxes are likely something you have to take care of yourself. You’ll need to follow the same tax laws as other independent contractors. Freelance writers need to follow the same tax laws as other independent contractors. But, there are some issues that freelance writers should be mindful of to avoid problems with the IRS. The tax code changes every year, and it’s crucial to stay up-to-date on all of the latest developments. 

You’ll want to ensure that you’re properly preparing your taxes. In this blog post, we will discuss four tax tips for freelance writers in 2021.

Keep Accurate Records Of Your Income and Expenses

One of the biggest challenges when filing taxes for freelancers is keeping track of all your income and expenses. You’ll need to keep a record of all costs incurred in the course of earning an income, including things like travel or equipment that would be necessary to earn that money. Other common expenses for freelance writers include subscriptions, research services, and software. Create a simple spreadsheet to keep track of every cent that comes in and goes out.

Another thing to keep track of is any money earned from secondary sources or passive income streams apart from your main freelance writing work. These will include things like selling your own books, selling photographs you’ve taken of locations for travel writing jobs, or licensing images to be used in your blog posts. Any miscellaneous payments should be recorded. This way, calculating the tax on your income, including 1099-MISC income, becomes easier, as noted by experts at https://www.thepaystubs.com/blog/human-resources/how-to-calculate-tax-on-1099-misc-income.

Understand How Taxes Work on Different Types Of Income

When you’re self-employed, it’s important to understand how taxes work on different types of income. That means being familiar with your tax bracket and knowing which deductions are available to you as a freelancer. Recording how much you earn from a particular client or project is important, but it’s equally vital to understand how that money will be taxed. Freelance writers have to pay self-employment tax, which is a combination of Social Security and Medicare in the U.S. and comes to 15.3%. 

When you receive your income, you should go ahead and subtract your expenses and then calculate the 15.3% income tax. You also decide whether to pay your taxes annually or quarterly. In most cases, you’ll need to pay the self-employment tax once a year. However, if your income from freelancing is less than $40k per year and most of it comes from one client or project, then you may be able to file quarterly. You can also decide how much money goes toward estimated taxes each quarter.

Check Out All Available Deductions That Could Reduce Your Taxable Earnings

Deductions can be the difference between having no federal or state income taxes owed at all or owing a little bit of money to the IRS. Tax deductions are expenses that you can subtract from your gross earnings before calculating how much income tax you owe, which could result in lower taxes owed. There are two broad categories of deductible items for taxpayers: those deducted directly and those entered as itemized deductions.

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Freelancers can deduct items such as their home office expenses, travel costs, business cell phone usage, subscriptions, and many more. Keep in mind that you must be able to prove with receipts or other records what deductions you are taking on your taxes. Otherwise, the IRS will deny it. For freelancers who plan to travel for work-related matters, all travel costs can be deducted as long as they keep track of their mileage and receipts. Take advantage of these tax deductions to save money on your income taxes.

Hire a Professional To Help With Your Taxes And Accounting

If you’re too busy handling your own taxes or need help, it’s important to have a professional handle your taxes and accounting. Working with an accountant will help you avoid mistakes that can cost money in the long run. Hiring someone who specializes in freelancing means they know exactly what expenses are tax-deductible and what paperwork needs to be done. Having someone handle the task allows you more time to focus on what really matters, the work itself.

A Few Simple Steps is All It Takes

As a freelance writer, it’s important to ensure you comply with tax laws and regulations. By keeping track of your income and expenses, understanding how taxes work, checking tax-deductible expenses, and consulting a tax expert, you can avoid the potential pitfalls and penalties of noncompliance.

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