When you work as a freelancer or gig worker, how you earn your income can make a huge difference in your monthly salary. In addition to redoing your household budget every month, your fluctuating income also requires you to approach tax filing differently.
This can often make you fret about tax season and all the requirements it brings to the table. But once you learn the basics of tax filing, you can smoothly go through this process every year.
Here are essential tax season tips for freelancers and gig workers.
Know Your Tax Obligations
Not knowing your specific tax obligations is one of the biggest tax mistakes you can make. If you’re unaware of how much tax you should be paying according to factors like your income bracket, type of revenue, and filing status, you can end up disrupting the entire filing process for yourself. To avoid this issue, invest time learning the tax obligations that apply to your case as a freelancer.
Document Your Finances
Whether you file taxes yourself or turn to a professional for tax planning, you must have your financial records available to go through the process. Make it a point to document your finances throughout the year and keep things organized. This includes your income channels and your spending details. Maintaining clear invoices and receipts turns the scary filing process into a breeze.
Learn About the Differences of Filing
Whether you use a manual or digital document organizer to keep your financial records in one place, they might not do you much good if you don’t learn how to use them during the filing process. That’s why, you should dedicate some time to learning details like your tax filing deadline and the benefits of filing as an individual or a married couple. This could help you unlock many advantages year after year.
Look Into Possible Deductions
When you file taxes as a salaried individual or a business owner, you can access various tax deductions that lower your overall taxable income. This is also true for freelancers or gig workers. By researching possible deductions to apply, you bring down your tax liability while complying with all applicable tax regulations. Think of this process as being similar to understanding the plumbing code.
Consider If You Can Get Tax Credits
Tax deductions slash off a portion of your overall taxable income. But tax credits are a dollar-for-dollar reduction in your tax bill. Besides tax credits for freelancers and gig workers, there are also available credits for installing solar panels at your home. This can help you significantly reduce your tax bill and add money back to your savings account.
Get Ahead of Deadlines
Every year, the tax deadline for individuals typically falls on April 15. But this can be moved around a few days. With that being said, it doesn’t mean you start filing your taxes just a day before the deadline. In fact, as soon as tax filing opens sometime in January, you should start with the process. This lets you avoid unnecessary delays due to problems like filing errors. You can use an organizer app to keep you on top of deadlines.
Don’t Be Afraid to Ask For Help
Similar to how you may find financial advisors in Melbourne to improve your finances, you can also reach out to accountants all over the world to get help with your tax filing. These tax accountants require basic details like your freelance income invoices, spending records, and investment assets. From there, they can help you file your taxes accurately to avoid any problems afterward. However, this approach can cost you a little money.
When you remember these tips, you can handle the challenging tax season without breaking a sweat. This lets you focus on your ongoing gigs as a freelancer instead of worrying about how to report the income you get from them.
