Many freelance writers enter the wonderful world of freelancing by switching careers. Some freelance writers may have a technical background. Others may have worked in the finance, education, or various other industries. In most cases, freelance writers have little experience being self-employed contractors, and have spent most of their adult lives working in salaried or hourly positions.
Making a switch from a salaried or hourly position to an independent contractor can be a major change. If you aren’t familiar with the various aspects of accounting practices and tax laws associated with independent contractors, you may be in for quite an unpleasant surprise when Tax Day rolls around. Here are just a few important tips to keep in mind that will help you to save money on your taxes:
Keep Your Receipts. As an independent contractor, you are essentially running your own business from your house. So the IRS allows you to write off expenses pertaining to your business. Consider all of the equipment that you need for your home office, such a computer, a printer, a fax machine, and more. If you need to buy a new desk, work chair, or other furnishings for your home office. These items, as well as office supplies like printer paper, pens, note pads, toner cartridges, and more, are all deductible as business expenses. However, in order to deduct them, you will need to keep receipts pertaining to these items. What’s more, with the new IRS rules going into effect next year, you will also be required to get a 1099 from companies that you purchases deductible goods or services from with amounts over $600. This rule is still being adjusted, and the latest IRS statement shows that the IRS will require the 1099s for expenses purchased with cash only. If these large expenditures are purchased with a credit card or debit card, the 1099s will not be required. It is advisable to keep up to date with this topic, as it is still developing.
Keep A Mileage Log. As a freelance writer, you likely spend a lot of your time working out of your house. However, for any mileage your travel related to your freelance writing career, the IRS allows you to deduct that mileage as a business expense. So for all trips to the library, the bookstore, the office supplies store, and more, these miles are deductible – provided you keep a mileage log. You can also deduct miles for any research-related trips you take. For instance, if you are writing an article about the local art museum downtown, you can deduct your mileage to and from the museum.
Maintain A Home Office. If you have a section of your home that is dedicated solely to your business as a freelance writer, you are permitted to deduct a portion of your home expenses. Basically, you will calculate the percentage of your home that is used for your home office, and then apply that same percentage to your home’s annual expenses like property insurance, utilities, water, security, and more. You can also deduct a portion of home repairs, too.
Keeping track of all of these expenses may not seem like it’s worthwhile. For instance, let’s say your home utilities expense for the year is $2000 and the percentage of your home used as your office is 5%. So your utility expense that could be deductible is $100 for the year. This is likely a small amount compared to your annual income. However, when you take all of these deductions listed here together of the course of the year, the amount you can deduct is really a large amount. The key is to know what expenses you can deduct and then keep track of them for the entire year so you can take full advantage of your deductions on Tax Day.
Please note, this information is not guaranteed to be accurate. Take it with a grain of salt, and consult a qualified tax accountant.
