How to Never Worry About Taxes Again
Whether you know it or not, we’ve entered tax season. It’s the time of year when everyone is stressed about financials, paperwork and how much Uncle Sam is going to take from them.
For a freelancer, this time of year is extra stressful. When you have variable income, multiple clients, and business expenses, your tax situation as a freelancer can get a little tricky. That’s why it’s important to implement strategies that keep you organized.
Here are a few strategies to try so that you never worry about taxes again.
Get Organized Online
Unless you’re in an industry that requires hard copies of paperwork, you can totally get in the habit of saving PDF documents into an organized secure cloud system.
When I first hired my accountant the first thing he had me do was scan every tax return, bank statement, contract and other financial documents I had. He then suggested I store them in an organized fashion with something like eFileCabinet. What makes eFileCabinet awesome is (God forbid) you ever get audited, the auditor can access your account and see everything from there.
Create a System for Financial Documents
In my business, my team and I have a system for organizing financial documents.
I know I need to send bank statements, credit card statements and PayPal statements to my accountant once a month. At the same time, I tell my virtual assistant to upload the documents into the secured cloud system under their respective month, year and category.
It only takes me a few minutes to download and send documents. The rest is taken care of by my team. This small action once a month helps keep me organized all year long so that I never really have to worry about taxes.
Save For Taxes As You Go Along
One of the most enlightening books I’ve ever read about finances for freelancers was The Money Book for Freelancers, Part-Timers and the Self-Employed.
In the book, they talk about how freelancers constantly worry about taxes. One of the reasons is because they fail to save for taxes as they go along. Another reason freelancers constantly worry about taxes is because they may miscalculate how much they owe on a quarterly basis.
The best way to avoid the “How am I going to pay the tax man?” stress every quarter is to save for taxes as you go along. In this particular book, the mention how freelancers should sock away at least 15 percent for federal taxes, but the tax situation varies greatly by individual situation, business, and state.
Get an Accountant
Many writers of the Due.com blog have sung the praises of having an accountant, and it’s with good reason. As a freelancer, you have a complicated tax situation. Freelancers already know this, and it’s why they worry about taxes so much.
Rather than trying to figure it out on your own (and probably miscalculating something or just completely failing at it), hire one of the pros to help you get squared away.
For example, your accountant can tell you exactly how much you need to save for estimated taxes. Some of them can also do your bookkeeping for you. These two things alone help you keep calm and carry on in your business.
Be Grateful You Have to Pay Taxes
Everyone always complains about the nice chunk of profit Uncle Sam takes from them, but the reality is that if you have to pay taxes it’s a good thing. Simply put, if you have to pay taxes it means you made a profit and that is certainly something worth celebrating.
Sure, it sucks to see the money leave your bank account. But by realizing that this means you actually made money you can quickly feel some gratitude and appreciation.
Another thing to keep in mind is taxes help make the country go around (at least in theory). One way I try to remember this is to rename my tax savings account to “Helping My Country.” It takes the edge off of knowing that money is as good as gone.
You don’t have to spend your life as a freelancer worried about taxes. It’s a choice to feel that way and you have all the power in the world to make sure you never worry about taxes again.