After a couple weeks’ worth of balmy weather, springtime seems to have arrived early, bringing at least two annual inevitabilities along for the ride: mud and tax prep.
While I feel compelled to offer the standard disclaimers at this point–I am neither an attorney nor a CPA–there are a few general things I can point out, such as that if your business structure involves any employees or partners, you may need to start your tax preparation process well in advance of April 15. Employees and contractors are due their W2s and 1099s by the end of January, and if your business has to file any K-1 forms, they’ll most likely be due around mid-March, unless your fiscal calendar does not follow the standard calendar year. Other fun things, such as annual reports and state income taxes for workers, may or may not apply to your operation.
Although the IRS has extended the traditional filing deadline slightly for the current tax year (it’s been bumped back to April 18 across the board this year, and if you live in Maine or Massachusetts, you’ll get an extra day), it’s never a great idea to wait till the last possible minute to file, because some sort of time suck invariably comes up: a math mistake, a missing form, a complicated work sheet, an uncooperative printer. If you haven’t done so already, now is the time to run a year-end profit and loss statement on your freelancing income and check for missing or duplicated data. I like to label a couple of folders for the outside tax-related forms that always come in for specific personal and business items–stuff like medical expenses, 1099 forms from people who paid you, student loan payments, and mortgage interest. If I forget to do that, they’ll end up scattered everywhere.
If you have other income sources (from a spouse, investments, or a second job), you’ll want to see how your freelancing money is likely to affect your overall income tax liability. Remember,too, that as an independent freelancer, you’re technically self-employed, which makes you responsible for paying both halves of the payroll taxes you and your employer would have been splitting if you were a traditional employee. Since it’s mid-February now, you still have a couple of months to set money aside if you expect to owe some taxes when you file.
Do you have any quick tips for tax season? Share them in the comments!