by Mary Grace Donaldson
INCOME TAX TIPS AND SOLUTIONS FOR FREELANCERS Freelance workers -- otherwise known as independent contractors -- across all industries, are familiar with filing a complicated income tax return. With multiple employers comes the frustration of multiple Form-1099s. Another frustration that comes with freelance work is the apparent absence of those forms. Should an employer or a client fail to provide their freelance workers or independent contractors with a Form-1099, the employees are still obligated to produce an accounting of the income from that employer for the IRS. With multiple obstacles at play, how can a freelancer go about filing taxes efficiently? Keep track of all of your income Track every check or electronic payment on a spreadsheet or other log -- whatever works best for your needs. Even if, historically, clients have provided a Form 1099, log the payments anyway. Do not assume that you will receive any documentation from your clients. Be sure to keep this log organized; when multiple clients are involved, it is easy for human error to affect your record-keeping. It is not easy to keep track of similar payment amounts. Make sure you ask for tax forms early, and follow-up if they do not arrive Employers -- or clients -- are required by law to send all tax forms to you by January 31. Of course, as evidenced by the need for the above suggestion, that scenario does not always come true. In addition to keeping track of your income on your own, make every effort to obtain the tax forms due you, and early. Start asking your clients for the forms prior to January 31. If you do not receive a response or the forms by the first week and a half of February, follow-up. If one is within your budget, visit an accountant A tax expert -- any tax expert -- can answer all of your tax ramification questions, and find all of those tax breaks that are available to folks who work out of a “home office” -- as a freelancer, that’s you. “Do-it-yourself” tax software programs are useful, but many of the tax questions which arise for independent contractors are highly specialized and should be answered by a person rather than a computer. Set aside funds for Uncle Sam Unfortunately, a pitfall of holding a career as a worker who receives Form-1099s is that tax payments aren’t taken out of your paycheck. It is highly possible that you’re going to owe Uncle Sam some of your hard-earned money before Tax Day as a result. While parting is difficult, some of the pain of parting with your funds can be alleviated if you plan to part with them. Keep money sequestered away in a special account that you don’t touch before the big day. Set a benchmark for how much money you’d like to save in that account prior to when you’ll need it, based on how much you’ve paid in previous years, plus a bit more. The best case scenario is that you’ll over-save, and end up with more money than you thought you’d have. Filing and paying taxes do not have to be the tedious tasks that they often are for independent contractors with organization and advance preparation. Couple attention to detail with saving your money and impeccable follow-up, and tax time won’t nearly feel so stressful this year. 15
