Working as a freelancer in any industry has certain benefits that aren’t available to those working a traditional 9-to-5 job. Freelancers have flexibility when it comes to scheduling their days and choosing the projects they want to work on, and they do it all from the comfort of their homes or a remote office. However, the complexity involved in paying taxes on wages made as a freelancer discourages many people from trying this way of life.
Freelancers don’t have to give up their flexible lifestyles to avoid the complicated taxes that come along with it. Freelancers in Sacramento and Roseville can use the help of a CPA or accountant from Cook CPA Group to help them with their financial and tax-paying needs.
Cook CPA Group Services for Freelancers
Filing and paying taxes as a freelancer is a complicated process with lots of moving parts. Luckily, a CPA from Cook CPA Group can help with all aspects of the tax-paying procedures. The ways that accountants can help freelancers with their taxes follow:
Paying the Self-Employment Tax
People who earn wages as freelancers are required to pay the self-employment tax, also known as the SE tax. This tax is paid by not only freelancers, but also by people who have small businesses. The self-employment tax is paid at a rate of 15.3% on the first $132,900 earned. (Income above $132,900 is taxed at a rate of 2.9%.) The money from this tax goes toward Social Security and Medicare.
As a freelancer, it is possible to pay estimated quarterly taxes four times per year. Instead of paying all of your self-employment taxes at once in April, you can pay portions of the tax at quarterly intervals. You will still have to file paperwork for the year in April but filing quarterly will ease the financial burden of paying taxes. An accountant from Cook CPA Group can help freelancers successfully file and pay their estimated quarterly taxes.
Expense Deductions
Although the taxes that freelancers have to pay on their income can be large and arduous, there are ways in which the financial burden can be slightly relieved. Since freelancers technically run their own businesses, they are able to deduct many expenses from their taxes.
The biggest expense that freelancers are able to deduct is their home office. Since most freelancers do a majority of their work from home, a home office is an essential component of their businesses. There are certain requirements that must be met in order for the expenses related to a home office to be deducted from a freelancer’s taxes. A home office that is recognized by the IRS must be used regularly, must be the principal place of business for your freelance work, and must be a separate room or partitioned area in a room. The IRS allows freelancers to claim $5 per square foot of office space, up to 300 square feet.
Freelancers are also able to deduct the cost of supplies related to their business from their taxes. This includes computers, printers, pens and pencils, notebooks, and anything else that is needed to do their work. This can also include hardware and software for a computer. For freelancers that make items, the costs of the materials that are used to create those items can be deducted. Some things that are used to complete freelance work that are also used for personal work, such as internet service, may have a percentage of the cost deducted.
There are many other expenses that may be deducted from taxes paid by freelancers. Subscriptions to services and publications that are necessary to keep up with the industry, membership dues to professional organizations, tuition for professional development, fees related to maintaining an online presence for your services, contributions to a retirement plan, travel expenses related to industry events or meeting clients, meals with clients, business cards and other advertising materials, transaction fees from third party payment platforms you use to get paid, research materials, and the cost of an accountant or lawyer can all be deducted from your taxes.
A Sacramento or Roseville accountant from Cook CPA Group are able to help freelancers identify and claim deductions for the costs associated with their freelance income. Freelancers are advised to keep receipts related to all expenses they’ve paid in relation to their work.
Understanding 1099 Forms
People who do freelance work will receive a 1099 form by January 31 of each year to report the freelance work they did during the prior year. This form is only sent to freelancers that earned at least $600 of income from any particular client. This form is used to report income to the IRS when it’s time to file taxes in April. Freelancers should, when they receive their 1099 forms, keep careful track of them and show them to their accountant during their consultations.
Work with Experienced CPAs for Freelancers in Sacramento and Roseville
If you have questions about how to file taxes as a freelancer in Sacramento or Roseville, you should get in touch with the CPAs with Cook CPA Group as soon as possible. The accounting team that works for Cook CPA Group brings experience and commitment to all of the tax work they do, and they are available to answer any questions you may have during your free consultation.
