Archive | February, 2012

Some humor for the weekend

10 Feb

Thought we could all use something to laugh about heading into the weekend. Cheers to other freelancers working from home!

Advertisements

Taxes: Not sexy, but worth paying attention to

8 Feb

Seeing as we’re into a new year and it’s getting closer to Tax Day, (okay, April 17th sounds far away, but that deadline is going to creep up faster than you think). So lets talk taxes.

I know, I know. They’re not sexy, they involve obscure forms, convoluted directions, and, if you’re filing as a freelancer and weren’t the most organized, a lot of scrounging for receipts. But whether you choose to tackle them now, or two months from now, at some point soon we all have to wade through last year’s numbers to see if we owe money or get returns.

I want to help you make sure that you get returns, and that next year at this time, your taxes will be a breeze.

Did you know that if you are self-employed, you can get deductions for almost any work related expense? Camera gear, lenses, post production software like Photoshop or Final Cut, office supplies…you name it, if it is purchased for work, you can likely deduct it as a business expense.

Some deductions you can make that might not come directly to mind:

  • Mileage reimbursement for traveling to/from a work assignment/project–that photo shoot you drove 50 miles to get to? You can write off as a deduction and get reimbursed by the mile.
  • Professional development for business related reasons. That $900 dollar ticket to network/learn at SXSW? $140-225 annual membership fee to join ASMP? Payment to web developers to maintain and upgrade your online portfolio? All these are business expenses that are fully deductible at the end of the year. You just have to keep track of when, where, why, and how much you paid.
  • Networking/business expenses when you go out to dinner, lunch or drinks with a current or prospective client, assistant, or business partner and it’s specifically to discuss work, you can write off a portion of these costs.

Getting a feel for why taxes are so important? Tracking work expenses, and being even a little bit organized can save you hundreds, even thousands of dollars at the end of the year. Filing as a self-employed individual or small business means that you have to pay large taxes on your earnings, but the trade-off is you can write off the work expenses an employer would usually cover.

If you know you aren’t the best at keeping track of the details, or just want to make your life easier, set up a business banking account and use it for all work purchases. That way, you aren’t wading through hundreds of transactions at the end of this year and trying to sort out which were for business and which were for life.

As a freelancer or small business owner, the forms you will need are:

  • The 1040: The basic tax form that every individual, whether employee or self-employed needs to fill out.
  • The 1099: For each client you work with that pays you over $400, you’ll need a 1099 form giving the total amount they paid you for your services.
  • Section C: The form for writing off most business-related expenses

This is just a guideline. Depending on your field, you may need additional forms, or be eligible for more deductions.

Not sure where to begin? Schedule an appoint with an accountant at a company like Liberty or H+R Block. You can have a free consultation and get advice from someone with years of experience maximizing tax returns. If you’re more of a do it yourself kind, you can download tax forms directly from the IRS, or use a service like TurboTax for an easier filing experience. Note that the free version of TurboTax doesn’t give you access to forms that you will need to file as a small business or self-employed individual, so it might be worth it to just pay a professional. (Either way, you can write it off as a business expense).

Want to learn more? Other creatives have already written a bit about this subject. Seattle Photographer Chase Jarvis wrote a very helpful post from last year for photographers and filmmakers.

Have more specific questions? Add them to the comments! I’ll be interviewing a tax accountant closer to April who is generously lending their expertise!