Freelancing and Taxes

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Taxes are one of the constants in our lives. You”ve heard it before, and you will hear it many more times throughout your life the only two things that you can be certain of in life is death and taxes. You are going to die at some point, and the IRS wants the tax money that you owe, and they will go to great lengths to get it.
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As constant as taxes are in our lives, those who are just breaking into freelancing often don”t consider the tax dilemma. They have been working at a 40-hour-per-week job, where they are given a paycheck at the end of the week, which has already had taxes and Social Security payments deducted from it. If you freelance, this isn”t the case. You are responsible for paying your own taxes.
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In most cases, when you gain a client, you will need to supply that client with your legal name and your Social Security number. You may be asked to fill out a W-9, which is similar to a W-4, but designed for contract laborers, who are not regular employees. In January, you will receive a 1099-MISC form from every client for whom you have worked throughout the year. This 1099-MISC will show how much was paid to you for the work that you did.
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So, with the 1099s that you will receive, you will know how much you earned. The problem is that you have not paid taxes on that money throughout the year. On top of this, no Social Security has been paid in, either. You will be required to pay in self-employment taxes, which is actually Social Security. What this amounts to is a huge tax bill for you in April unless you have planned well.
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If you want to keep your taxes manageable, and keep the IRS off your back, the easiest way to do this is to contact the IRS. That”s right don”t wait for them to come to you. Instead, you go to them. The IRS is surprisingly helpful, and they will help you to start paying your taxes in quarterly, based on what you expect to earn. This is much easier, and keeps you in the good graces of the IRS.