Strategies for Fall: Tax Planning Tips for Freelancers

As the final days of summer fade and we start wondering whether the pumpkin spice latte is back at Starbucks, freelancers have another important item to add to their to-do list: tax planning. Tax planning is most effective as a year-round activity, but freelancers, who often spend days juggling multiple projects, chasing clients, and worrying about fluctuating income, should begin to lay the groundwork now.

Why? One reason is that the third quarter wraps up on September 30th, which is also the end of the fiscal year for the federal government and many companies. This means that now is the perfect time for freelancers to revisit their estimated tax payments, refine income projections, and get their financial records organized. By taking these steps now, freelancers can make the year-end accounting process less stressful and have a more manageable tax season.

Here are five fall tax planning strategies to get freelancers started:

1. Start preparing for taxes now: Freelancers should start preparing for taxes as soon as possible. Tax planning can feel overwhelming, especially when managing multiple freelance gigs. With less than 20 weeks left in the year, waiting until the last minute to review finances and assess potential tax liability will only add to the end-of-year workload.

2. Visit the IRS self-employed individuals tax center: The IRS self-employed tax center is a valuable resource for understanding freelancer tax obligations, finding a tax professional, and answering frequently asked questions. Taking the time to visit the site can ensure freelancers are informed on the latest federal tax information.

3. Calculate estimated tax payments: Estimated taxes are prepayments made throughout the year on income that isn’t subject to withholding, such as freelance income. Freelancers should recalculate their estimated taxes for the remaining quarters based on year-to-date income and expenses. Saving 25-30% of income for tax purposes is often recommended to cover estimated tax and self-employment tax.

4. Revisit common freelancer tax deductions: Common tax deductions for self-employed individuals include marketing expenses, software subscriptions, and business-related travel. Freelancers may also qualify for a home office tax deduction. Keeping all receipts to support expense claims is crucial to avoid disallowed deductions and increased tax liability.

5. Schedule a meeting with a tax advisor: Meeting with a tax advisor is essential, especially for first-year freelancers, those with increased freelance income, or those who have experienced significant life events. A professional tax advisor can recommend strategies to save money and ensure that the chosen business structure aligns with the freelancer’s needs.

In conclusion, fall is an ideal time for freelancers to focus on tax planning and prepare for the upcoming tax season. By following these fall tax planning tips, freelancers can stay organized, minimize tax liability, and make the process smoother and less stressful. Don’t procrastinate on tax planning—start now and set yourself up for a successful tax season.