There are a lot of ways to do taxes for your freelance writing business. You can use a tax professional, or an accountant. If you already use someone like this for your taxes, there is no reason to not also have them do you freelancing taxes. You can do them by hand, but you need to really know what you are doing and make sure you include all of the necessary forms, while also not including extra forms or papers that you don’t need. For most self-employed freelance writers, doing your taxes with tax software is probably the best route.
TurboTax for Freelance Writers
In my second year as a freelance writer, I had an accountant do my taxes. He came highly recommended from another family with their own business. I had this vision of him talking me through my businesses, sifting through records, and then finding me oodles of lucrative tax deductions.
Instead, he gave me a workbook and asked me to fill it out. Along the way, I recognized the blanks in the workbook as the same as the blanks on the IRS Schedule C Form. What value is there in me going through my receipts, adding them up, and then putting an amount on the “supplies” line for him to just type that same number, without any real review, into the accountant version of Turbo Tax.
The next year, I used TurboTax Home & Business. Ironically, many of the questions were word for word from the workbook I’d filled out for the accountant the year before. This year will be the 8th year I’ve used TurboTax Home & Business to do my freelance writer taxes, and it always seems to work out.
The key is to get the right version of TurboTax. As a freelance writer, you’ll need to figure out your self-employment taxes, as well as your home office deduction. These are either not supported, or are self-calculated in lower tier versions, so you really do need the Turbo Tax Home & Business version. Note that you can also generate 1099 or W2 forms if you hired anyone for your business as well, although I’ve never done that.
How To Use TurboTax for Writer Taxes
Once you download and install the software, you just go through and answer the questions as they come up. They may not use the order you would think, so you can click around the outline. Feel free to skip things and come back to them if you don’t have a particular piece of information handy. You can go back and forth and edit numbers over and over again, and it will just keep recalculating, so don’t be a slave to the interface.
The big things you will need are your 1099-MISC Forms showing your income, and then all of your receipts and records showing your expenses. Deduct everything you can. Self-employment taxes are murder and you’ll find yourself owing a huge percentage of your income otherwise.
Don’t feel like you are cheating. This is the trade-off of filing as a small business. You get to deduct more business expenses, but your actual taxes are based on a higher percentage (income taxes plus self-employment taxes). Claim every legal deduction you can. If you don’t know, do some research, check the forums, ask around.
There is one thing you are going to have a question about, and there is no 100% answer. That is where to deduct websites, webhosting, and other internet services. The answer is that there is no definite rule. I put mine under Advertising, but if you feel more comfortable putting them elsewhere that’s fine. It doesn’t matter because the end result is the same whether you deduct $500 as Advertising or as Software. Those numbers all get added up as a single number to deduct for expenses.
In other words, even if you did get audited, and even if they did have you move those expenses to a different category, your taxes owed would not change. If there is no change, then there is no problem.
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Other than that, most things are pretty straightforward. When you are finished, do the e-File, but print a hard copy to save for your records. I also recommend printing a copy as a PDF file. Print the extra schedules as well so that you have all the worksheets if you ever need to have them, even though they don’t have to be submitted to the IRS.
If you do get audited, it is likely to be a year or two down the road, and by then you might not remember the answers to all these questions.
We live more and more of our lives online, and maybe I’m just too old fashioned, but I recommend that you download the software, or get the installation disc, and install TurboTax on your own computer rather than doing the taxes online. This not only keeps your tax info out of the TurboTax databases, which may one day be hacked, or supeonaed, but it also means that you have your data on your own computer where it can’t be lost by another company. (Of course you should be backing up your computer regularly).
I’ll be starting my own freelance writing business taxes in the next day or two. I’ll make sure to add any updates, and include some detailed screenshots, so be sure to stop back by.