You have a few certainties in life: birth, work (you can define that however you want), death, and taxes. You don’t have any say-so over your birth or death. But your work and taxes? You have control there – even if you think you don’t. You still need to find that job that alleviates the tedium of existence (hopefully, you’re working at something that does more than that). However, you’re not assigned a position and locked into it for life. And while everyone will insist you don’t get any freedom in the tax department, that isn’t necessarily true. (And, no, I’m not advocating that you skip out on paying them) Because if you’re a freelancer? You have some wiggle room.
But you need to think through things.
The tricky part of working as a freelance writer (or any freelancer, really) is YOU have to manage all of the business end of things yourself. You’re the employer. While you work for a client, they’re not going to handle taxes for you. That falls into your lap. And how much you have to set aside from every job? That depends on where you live. But, on average, 25-30% is a good place to start. This makes sure you’ll have enough to keep the IRS, your state, and (potentially) your local governments happy. But, depending on your situation, you have some flex in that percentage.
For instance, you may not need to pay for your own health insurance. Or you can elect to not pay into social security. (It’s NOT a requirement) And as a self-employed worker, plenty of local governments cut you some slack if you work from home. It involves a TON of reading come tax time, and you may need to ask questions to understand all of the jargon, but you can find neat little ways to save yourself some taxes, courtesy of functioning as a business. And while an accountant can walk you through all of this (and happily take your money doing so), tax programs will do the same for a fraction of the cost.
Then there’s the REAL fun.
You’re an independent business. (Or, you know, you may work in collaboration with others) But that means you’re entitled to claim business expenses on your taxes. And when you look at it, that includes PLENTY of your day-to-day materials. Everything from paper to printer ink (even pens and pencils, if you want to go that far). You also get to list all of the subscriptions you use for your work – something I like to forget as I stare at the prices and agonize over whether it’s worth using some of my hard-earned funds or not. I can’t survive without Evernote or Grammarly; they’re in use EVERY SINGLE DAY that I work. And the free versions? While functional, they don’t provide the same services. I also use Adobe Stock Photos because (now and then), I need to chase down an image I can’t find in the LONG list of free stock photo search engines I have bookmarked. And all of them are business expenses I list on my taxes!
But I struggle to remind myself of that fact. When I look over my account each week, I need to take a deep breath and remind myself that certain things are worth the expense. (Which is crazy, considering I’ve smashed every financial goal I’ve set) Maybe other freelancers do so without a second thought. I’m someone that’s always watched every cent and needed to justify a purchase that wasn’t strictly necessary for survival. So starting on the freelance writing path? It took a shift in my mental processes. Despite all of my research and reading, I have to coach myself and go through a list of questions before hitting that, “Accept” button:
- Will I use this often enough to justify the cost?
- Is this going to benefit my writing?
- Does the premium version offer more than the free?
- Did you forget this is a tax-deductible thing?
If you’ve never handled business expenses, financial planning, or taxes on your own, it gets overwhelming. And doing my taxes this year? They were frightening and involved a TON of reading and research. But, between my husband and I, we got them completed without too much trouble. Luckily, I use a financial program to track every cent in and out. Plus, I keep my business receipts so they’re easy to enter into TurboTax. (If you stay organized, it makes the business side of things simpler to deal with) And reading? Yeah, I did as much of that as possible before I ever submitted my first proposal for a job.
You’re not going to get out of paying taxes – even with the freedom being a freelancer grants you. But you WILL find ways to make that particular guarantee easier to manage if you’re smart and do your homework. (And that means knowing you can’t claim the chair you bought for your cat to sit at your desk) And once you understand your way around things, it gives you a breath of fresh air so you CAN start to pick up the things you need to function properly. It’s a careful balancing act. But with a little work, you start to get it down.