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Paying Taxes While Freelancing

Several Suggestions for Handling Taxes as a Freelance Web Designer

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When you're just starting out as a freelance Web designer, chances are you aren't making much, if any money. But ignoring taxes is a foolhardy thing to do. Instead, you can take some simple steps to manage your taxes so that you don't get into trouble when they are due.

Pay Taxes Out of Your "Day Job"

If you're just starting out freelancing, chances are you have another job that you do to cover expenses. And most likely, that job has the taxes taken out every paycheck. When you started working there you filled out paperwork to tell the company how much you wanted them to withhold and send to the government in taxes. Then your taxes for that job are sent to the government automatically.

But there is no rule that you can't have your day job take out more money for taxes. Simply go to your HR department, get a new copy of the form and increase the amount that you want them to send to the government. You need to be able to estimate how much money you think you'll earn (or have earned, if it's late in the year) and thus how much in taxes you'll owe. But even increasing it a small amount can ease your mind when tax day rolls around. And if you over-paid, then either decrease it next year or work on getting more freelance projects.

Save a Percentage Out of Every Job for Taxes

If you don't have a day job or you don't want to over-pay your taxes, you should save the money to pay at the end of the year. It's no fun to feel like you had a great year of freelancing only to get to tax day and owe more money than you have in your accounts. I recommend keeping a separate account just for taxes, so you're not tempted to spend it and "put it back next month".

Remember too, that most governments want to be paid taxes more often than once a year. If you don't have a day job that pays taxes regularly, you'll need to send in quarterly taxes. This can also happen if you start making more money freelancing than you do at your day job. If you're in that boat, congratulations!

Find a Tax Preparer

Even if you regularly prepared your own taxes before you were a freelancer, it's a good idea to find a tax preparer at least your first year as a freelancer. This person can help you manage your tax burden and give you other suggestions for paying. Plus, they know what types of things you can write off on your taxes and what types of things might invite an audit. Remember, you can write off the expense of a tax preparer on next year's taxes.

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