Starting a freelance business can be complex and overwhelming. Here are a few tips to save you time and money as you get started in your freelance business.
Start Keeping Track of Freelance Income and Expenses Immediately
One of the most common and frustrating problems that freelancers face around tax time is missed expenses. If you do not keep track of the money spent for business use, you will not be able to claim the tax benefit of those expenses. Don’t miss out on these deductions. A simple way to ensure that you are keeping track of all of your business activity is to use an accounting software. Whenever you receive any money from a gig, write it down. Whenever you spend money on tools or equipment, write it down. The extra time you take to record your business activity will save you the time and headache of trying to retrace your steps at tax time.
Don’t set up your business before you talk to an accountant or you could end up paying too much in taxes. Schedule a no-obligation consultation with an expert from 1-800Accountant.
Register Your Freelance Business Wherever You Are Located
Another common mistake people make when starting a freelance business is registering their business in the wrong state. They think they have to look for states that have “business-friendly” tax laws. But that may end up being a wast of time. You are only required to file tax returns for your freelance business in the states you are physically present in or wherever you physically perform the work. Registering in a state just because is has less strict tax laws is unnecessary. It could even be costly if the state has have a franchise tax.
Keep a Record of Mileage and Business Assets from the Beginning
If you are working as a freelancer, you probably put in a lot of miles to get from job to job. In order to claim an auto expense, you will need to keep track of your mileage. Mileage is easy to keep track of as you go along. However, it is nearly impossible to go back and get an accurate count if you try to do it after the fact. Make sure you record your trips each day. Don’t put it off until later. The IRS loves to audit mileage deductions. Make sure they’re correct. You don’t want to be guessing when you enter these numbers.
File 1099s for Outside Services
Sometimes as a freelancer, you will need to hire some outside help to get a certain project done. Be sure to file a 1099 for any outside contractor you pay more than $600.
