Freelancing comes with a lot of upside – answering to yourself, being able to work remotely and decide which jobs you take. But with all that freedom comes responsibility. Keeping your contacts in order in Insightly is one thing, keeping tabs on your expenses, margins, and doing your taxes is another. These aren’t the tasks that you necessarily signed up for when you went out on your own. And, they can’t be ignored for very long.
There are a few things you can do to avoid finding yourself in a mess, with a box of faded receipts or a half filled out spreadsheet, come tax time.
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Know your margins
Managing your taxes, expenses and take home income doesn’t start at the end of the financial year, it starts every time you agree to do a job. Understanding what your time is worth, what your break-even costs are and what your margin is will help you figure out whether you should actually agree to take on a new project.
Only take jobs that boost your cash flow, and don’t waste too much precious time on jobs where you make a loss.
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Log your expenses
If that shoebox of receipts or complicated spreadsheet freaks you out, change the way you log your expenses. Apps like Xero TaxTouch link with your bank accounts and credit cards to let you log transactions in real time. You simply swipe left for business expenses and right for personal.
A recent survey of hundreds of on-demand workers, conducted by Xero, found that a quarter experience difficulties keeping track of expenses, and a whopping 73% don’t deduct any expenses at all.
By not claiming work-related expenses, freelancers are missing out on the opportunity to lower their taxable income.
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Get out in front of your tax bill
By keeping good records of your incomings and outgoings, you get a clearer picture of what you’re taking home and what you have to hand over to the IRS. When April 15th rolls around, you’ll have the reports you need to prepare your Schedule C. You’ll know how much you earned, how much you saved and how much you owe – minus the paper receipts and missed deductions.
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Save the trees, stop using so much paper
By using a cloud-based solution to keep track of your expenses and your business position, you can slowly cut paper out of your life. It also means when you pick up the tab for coffee, you can log the expense while you’re on the fly. Rather than the receipt wasting away in your pocket and not being put to work. Your deductions are money in the bank.
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Get a pro
The tax system is set up in such a way that the onus is on you to lower your taxable income. According to the Xero data, more than a third (35%) of these freelancers interviewed report having trouble understanding and paying taxes, and 62% don’t make estimated tax payments. However, just 20% turn to a professional for tax and bookkeeping advice, and 73% file their taxes without help.
Enlisting the help of a pro or just keeping good records are two ways to lower your taxable income, ensure you’re following the rules and unravel any tax stress which seems to rear its head at this time of year.
Download TaxTouch to save time and prevent tax-time surprise.
At Insightly, we offer a CRM used by small and mid-sized businesses from a huge variety of verticals. Learn about all of Insightly’s features and plans on our pricing page or sign up for a free trial.
About the author: Russ Fujioka has over 25 years’ experience providing strategic and operational leadership to cloud, Software as a Service, and technology providers with a focus on sales, marketing and operational management of high growth businesses.
