In 2020, freelancing is the new normal. Around 57 million Americans now conduct some form of freelance work, ranging from paid blogging to freelance events planning and everything in between. No matter what kind of freelance work you do, it is crucial that you stay on top of your taxes.
Tax on freelance work comes with a number of challenges that are not present when you are having all of your taxes deducted at the source by your employer. In addition, the taxation and regulatory landscape for freelancers can vary significantly. That’s why it is essential that you use a freelance tax calculator.
A freelance tax calculator will help you stay on top of your taxes and ensure that you begin each year financially and legally prepared. Here is why you need to start using a freelance tax calculator.
1. Stay on the Right Side of the IRS
The first and foremost reason to use a calculator for freelance taxes is that it will ensure that the IRS is not breathing down your neck. Filing taxes correctly the first time is critically important.
If you do not use a proper freelance tax calculator and end up under-reporting your earnings, the IRS will flag you up as a potential problem. By properly calculating every penny you have earned, you can ensure that you stay on the right side of the law and in the good graces of the IRS.
2. Avoid Unexpected Payments
No matter your business model, the last thing you want is an unexpected tax bill for thousands of dollars, due immediately. You should be carefully calculating your tax obligations based on your monthly earnings.
You can then put the money aside that you owe for tax into a separate account. By taking proper account of your tax payments, you will know exactly what you need to pay and will not be slapped with a potentially ruinous and unexpected tax bill.
3. A Freelance Tax Calculator Can Help You Create Paystubs
If you are a freelancer, then creating your own documentation is important. Without pay stubs, you might find it difficult to obtain a mortgage, apply for a loan, or receive business loans. Fortunately, you can use an online paystub generator to create authentic paystubs in just a few minutes flat.
By using a freelance tax calculator, you can input all of the essential information about your earnings and deductions into the paystub generator. This will provide you with quality paystubs that you can use anywhere.
4. Figure Out the Deductions You Are Entitled To
Finally, it is important to note that, as a freelancer, you may be entitled to certain deductions. Know how to file taxes as a freelancer means knowing how to take advantage of the incentives provided for people like you. For example, did you know that the IRS offers a substantial Home Office Deduction, in which the costs of your WFH setup can be deducted directly from your tax bill?
By using a comprehensive freelance tax calculator, you can subtract deductions from your tax bill, ensuring that you get back as much money as you are entitled to.
Grow Your Business the Right Way
A freelance tax calculator is just one resource that you can use to grow your business effectively. For more essential information and business hacks for the year ahead, we have got you covered. In our Business Section, you will find expert tips on building a thriving and durable business model on your own.