As a freelance writer, you may be wondering if you need an accountant, or CPA, to do your small business taxes. The answer, as is often the case with money and business, depends upon your specific freelance business. However, are a few things that can make the decision of whether to use an account for your business taxes easier.
Over the next few days, I’ll be doing a series of articles about freelance writing taxes. It will include things like what freelancers can deduct, how to deduct a home office, and other items of interest regarding small home-based business taxes.
First thing’s first: I am not an accountant. This is not tax advice for your, or any other, specific situation. This is general tax and business information that you can use to make your own informed decisions. You are responsible for your own taxes and there is no warranty, guarantee, or pinky-promise expressed or implied. You get Uncle Sam mad, don’t blame me.
Which Freelancers DO Need an Accountant?
For starters let’s get rid of all those freelancers with businesses too complicated to do your own taxes. More specifically, let’s get rid of some people whose business situation is not one I understand well enough to give freelancer tax advice. All the advice here is related to people using Schedule C for their small business taxes. If you are not using Schedule C, then I have no idea what is going on with your business taxes, but chances are, you need an accountant.
Now, there is one other group of freelance small business owners that shouldn’t bother reading the information here. I know very little about employees and taxes. I had a nanny once; that’s the extent of my experience with employees and taxes. If you have an employee, who isn’t your spouse, then, once again, I’m sorry but this information is not for you. Employees make things very complicated. Even worse, if you mess it up, you are probably messing up more than just your taxes. If you have a non-spouse employee, talk to an accountant.
If your spouse is an employee, then you are fine with most of the information here if you are filing jointly. I don’t know anything about married filing separately, however. If you file separate, then you might need an accountant.
When Do Freelancers Need an Accountant for Taxes?
Are you ready for the short, short answer?
If your business is not complicated enough to require a bookkeeper, then changes are pretty good that you do not need an accountant to do your taxes.
Small business taxes can be really complicated. However, most of that complication comes from special, uncommon situations, or from having employees. If you run a small business out of a home office and you just collect payments from services rendered, then chances are you can do your taxes by yourself. More specifically, you can do your taxes using a tax software program like TurboTax or TaxCut. We’ll talk later about which version of tax software you might need.
If you have used tax software for your personal taxes, using it for your business taxes is really no different. You enter your earnings, only instead of W2 forms, you have 1099 forms. This income will pass through to your regular income taxes. Unfortunately, it will also be hit with a self-employed tax which is essentially the process of you paying your Social Security taxes and Medicaid taxes on your earnings. You get double hit here, because you are paying both the employee and the employer share of these taxes. This is why it is really important to get all of your business tax deductions. These deductions not only lower your income overall, they lessen the power of this double tax you have to pay.
If you do decide to use an accountant, or other professional tax preparer, don’t be surprised if he gives you a set of forms to fill out that end up basically being the same thin you would have to enter into a tax program. This is actually why most small business owners, entrepreneurs, and freelance writers are better off doing their own taxes using a computer program. In the end, all the tax guy does is type the same stuff you would have typed into a fancier version of the same program.
Again, if you have something oddball, like royalties you inherited, or companies that pay in foreign currency, or you are trying to deduct an 18-wheeler for your freelance writing business, you’ll likely need professional help. Otherwise, you may want to try doing your taxes yourself first. To avoid any problems, try doing your own taxes right away in February as soon as you have all the documents you need. But, also schedule an appointment with a tax professional for early March. If you aren’t done by then, go pro. If doing it yourself seems overwhelming, or there are things you just can’t figure out, go pro. Otherwise, you may just end up saving yourself a lot of money, and understanding your taxes better in the process.
Freelance Business Taxes Series
After reading this, you probably still have a lot of questions. Don’t worry, I’m betting most of them will get covered in the next week or two in our freelancer taxes series. I spent several years as a Certified Financial Advisor working with small business owners, I’ve been doing my own freelance writer taxes for going on seven years now, and I’ve helped dozens of friends and colleagues with their freelance taxes. Chances are, I’ve looked it up and figured it out. If you have a topic you would like to see covered, leave a comment.
- Section 179 – Deducing Equipment
- Home Office tax deduction
- 1099 forms and income
- What Kinds of Tax Professionals are there?
- What is deductible for a freelance business?
- Freelance writer taxes specifics
- Deducting equipment – Laptops, iPads, desks, oh my!
- Small business audits
- Deducting websites
- Deducting internet, phone, cable, and more