Set Up 2018 to Make Next Tax Season a Breeze

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You may have already given up your New Year’s Resolution of going to the gym 3X per week in 2018 (I’m speaking for myself), but the tax year is still young! It’s not too late to get your freelance business accounting in shape and organized to make taxes a breeze for the rest of 2018.

The following is Taxes 101 for Freelancers - an overview of what you should do in order to be organized and compliant with taxes. It all starts with the income you earn from your freelancing.
 

Track your income

Income is the lifeblood of every business, so it makes sense that it would be the first thing you need to track. Unfortunately, (to perpetuate the blood metaphor) the IRS is like a vampire that sucks a little bit of taxes from every dollar that you earn. However there is hope; you can reduce the amount of money sucked from your wallet by tracking your deductions!
 

Track your deductions

Deductions are amazing - they reduce your “taxable income”, thus reducing the taxes you owe to the government! Depending on your situation, you may be able to save thousands of dollars simply by keeping track of your deductions. Deductions come in two main flavors:

1. Business Expenses - money spent on anything utilized in the running of your freelance business. (i.e. a new camera if you’re a photographer, art supplies if you’re an artist, software for managing clients, etc.)

2. Mileage - miles you’ve driven while engaging in business activities. You must be the owner of the vehicle.

Now that you’ve tracked your income and reduced it by your business deductions, you can calculate the taxes you owe (exciting, I know...).
 

Withhold for taxes (this is a biggie)

People with a W2 job (you know, the “normal” 9-5) have something that self-employed individuals don’t; tax withholdings. A regular employer removes the portion of a W2 paycheck that should be sent to the state and federal government.

In contrast, freelance business owners are responsible for their own taxes and must calculate the amount owed to the IRS and state. This makes it extra important that you accurately “withhold” taxes from each paycheck; you don’t want to end up spending money you owe!

 

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Pay your quarterly tax estimate

Now that you know what you owe, the IRS (and most states) require that you pay taxes earned on 1099 income 4 times per year, not just once on April 15th like other taxes. If you don’t pay your quarterly tax estimates, you’ll end up receiving penalties from the IRS and potentially your state as well.

It’s safe to assume that you didn’t become a freelancer to learn the ins and outs of the US tax system, but you’re in luck! There are a some tools you can start using today that handle everything discussed above and will make handling your 2018 taxes a no brainer. You don’t need to calculate taxable income or tax brackets - simply categorize your transactions and (some) of these tools will do the rest!

 

Software Solutions

Track.tax - Our (biased) recommendation to handle all of your 1099 tax requirements. Track.tax is simple to use and is the only tool that can track your income, business deductions, withhold for taxes and pay your quarterly estimates. Track will automatically identify your income (mixing your personal and business no problem for Track), allows you to categorize expenses, will withhold the correct amount from every paycheck, and automatically pays your quarterly estimates on time :D

Cost: $10 / month (first 3 months free for HoneyBook members)

✓ Tracks Income
✓ Tracks Business Expenses
✓ Withholds Your Taxes
✓ Submits quarterly estimates to the government
✓ End of Year filing


 

Quickbooks SE - This product (built by Intuit) is a full bodied accounting software package focused on self-employed people. However, they don’t have the ability to withhold for your taxes and you must pay extra to use their TurboTax product to pay your quarterlies.

Cost: $10 / month for basic, $17 / month w/ TurboTax

✓ Tracks Income
✓ Tracks Business Expenses
✗ Withholds Your Taxes
✗ Submits quarterly estimates to the government
✓ End of Year filing


 

Hurdlr - Basically a clone of Quickbooks SE. With this product you’ll need to withhold for taxes and pay your quarterly estimates yourself.

Cost: $6 / month

✓ Tracks Income
✓ Tracks Business Expenses
✗ Withholds Your Taxes
✗ Submits quarterly estimates to the government
✗ End of Year filing

 

Painless1099 - A dead simple product that does nothing more than withhold taxes from every paycheck. Downside is that you must use a dedicated business account, doesn’t track expenses, doesn’t pay quarterlies and it only works with certain types of deposits.

Cost: 0.35% of every income deposit

✓ Tracks Income
✗ Tracks Business Expenses
✓ Withholds Your Taxes
✗ Submits quarterly estimates to the government
✗ End of Year filing

 


Track.tax is a web app that calculates, withholds, and pays self-employment taxes. All freelancers struggle with running their "back office", let Track handle your taxes. 

Have any questions? Feel free to reach out to us at help@track.tax

Track.tax

Track Technologies, Inc., 814 Mission Street, San Francisco, CA, 94103

Track is an app that makes it easy for the self-employed to withhold enough for taxes every time they get paid, so they don’t spend what they owe.

When Track sees new 1099 earnings in their bank account, it automatically withholds enough for taxes on that income into a Tax Savings Account (TSA)... think like a HSA but for tax withholdings... so they have enough to pay what they owe on tax day.