This year was my first year filing an ass load of 1099s. Luckily the 1099s were offset by a W-2 job I had for the first 8 months of the year. (I only owe $300 this year!) September of 2011 was the first time I made the leap into freelancedom and I’ve not looked back. Next year’s taxes are going to be cray-cray.
I was really nervous about filing as a newbie freelance writer. I had no idea how much in taxes I was going to owe and I wasn’t sure the best way to go about filing. (Should I go with an accountant or the TurboTax route?) I did my research and ended up filing with TurboTax Home & Business yesterday. It was painless and I learned a lot from it. Side note– I haven’t gotten to the self-employed quarterly taxes part in my freelance life yet. That’s the next hurdle.
I’m neither a tax/accounting professional nor well experienced in this matter. In other words, I’m full of shit half of the time, so please take my suggestions below with a grain of salt and do your research first! This is what I learned the first time around and I’m sure I have plenty more to learn!
TurboTax or Accountant?
I was ready to pay someone to do my taxes because I was afraid that in using the basic version of Turbotax, I was going to miss out on a lot of deductions. That was before local writer Dan Solomon suggested I use TurboTax Home & Business. Dan is a well-experienced and prolific writer in town and has used TurboTax Home & Business for his taxes. It is $99 and easily walks you through all the deductions you can make for your business. A process that I thought initially would take many hours and a lot of money took only an hour with TurboTax Home & Business. If you have an LLC, that might be a different matter.
Update- A friend said regular TurboTax also walks you through deductions. Anyone freelancers here think one is better than the other?
Update update- I used regular TurboTax for 2012 instead of Home & Business and it walks you through deductions as well.
What Can I Deduct?
Having never made deductions before, I was not well versed in this matter until I did my research. I ended up learning that you can deduct many items such as your health insurance (if you pay for it), a portion of your rent/mortgage (if you work out of home), a portion of phone bills (if you use for business), any business related expense (for me I deducted domain purchase, web design fee, web hosting fee, business cards) and business meetings (meetings w/ other writers, meetings w/ interviewees). You can even deduct entertainment expenses such as Netflix, magazine subscriptions or books if you used them for work too. At first I didn’t think the deductions would add up, but by the end, I was able to deduct a couple of thousand dollars from my freelance work. I got to watch the money I owe the G’ment go down with each deduction. It was such a rewarding feeling.
Here are some great resources on what you can deduct as a freelancer:
101 Deductions for Bloggers and Freelancers
20 Deductions for Freelance Writers
Tax Deductions for Freelance Writers, the Self-Employed and Other Sole Proprietors
Keep Track of Your Records
Record keeping sucks ass and I’ve never been good at, but wanting to make sure I did this whole freelance thing right, I kept a binder for receipts and a small vehicle mileage book in my car. I wasn’t always good about keeping mileage, so that’s why GoogleMaps is your best friend. I’m surprised that I actually did as well as I did keeping records. I also went back through old bank statements to make sure I didn’t miss any appropriate deductions and my calendar to make sure I didn’t miss any appointments. A lot of people will tell you that you can get very colorful and ambitious when it comes to deductions. Essentially you can write off anything, they’ll say. I have a hard time doing this. Even though I’m poor as shit and most likely not at risk of an audit (TurboTax even told me so!), I still want to have the records to back up what I’m deducting. It’s up to you what you decide. The likelihood of you and I getting audited is slim, but I like being an honest person. Check out this story from The Rumpus about a writer’s deduction predicament.
Talk to Others
The best thing you can do is talk to others in your field about what they do come tax season. Tweeting about doing my taxes as a freelancer brought a slew of comments from others in the same position. It helped me to remember that a.) I’m not alone in this and b.) A lot of people have done this before.
18 Comments
1099s are a real drag.
Tell me ’bout it!
One of the more surprising deductions I learned about last year was mileage and/or transit fare to go to/from a volunteer gig.
Nice! I used to volunteer a lot. I need to get back into doing that. Being a freelancer there is no excuse!
This is the first year that I filed all of my “musician/writer” stuff, and boy was it an eye opener. I hear you. 1099’s can be the devil. THE DEVIL. Great article.
Thanks! What was the biggest thing you learned this year?
I got so screwed on taxes this year. The first half of 2011 I was a 1099 and the second half I was a w-2. I paid 1k in estimated taxes back in June ’11 thinking that would be enough considering that’s how much I owed the following year in est taxes.
Nope, even with all my deductions (student loans, mileage, rent, phone & internet bills, etc.), I still owed the government $2,500 this month. And the absolute worst part about it was I sent my check in early, the beginning on April but post-dated my check for the 15th (after payday) and they cashed it on the 4th. The 4th! This caused me to overdraft and wipe my checking clean. I found out the hard way that the dates on checks don’t matter UNLESS you have an agreement with the other party to not cash it before the date. Otherwise, anyone can cash a check before the date because it’s considered an ‘in-demand’ check. B.S.
Obviously I’m still a little mad.
Great article – I was in your shoes. There is so much involved with understanding taxes. For 2012 I’ll be w-2 the entire time. Thank god!
Oh man! Robin, that sucks! I’m so sorry! You must have made a lot with your 1099s! I’m really nervous about how much I’m going to owe next year.
I’ve also learned the hard way that check dates don’t matter! Ugh.
First year for me with nothing but 1099s and envelopes stuffed with receipts and whatnot. Definitely a drag.
Also, I’m not an accountant, but I think you can just claim total mileage for the year times a fixed amount if the car is a business car. Something like that. Started doing that because I throw away gas receipts without thinking about it.
You can also write off your accountant if you hire one. I write off everything! You can write off mileage for your vehicle for all work-related driving. And you can write off part of your rent and utilities (if your office is at home).
As a long-time freelance writer, I can tell you that taxes get easier over time to accept as a fact of the freelance life. What you may really hate is the quarterly payments, which can be hard to swallow if you make decent money as a freelancer. If you don’t pay those, you will be financially penalized.
Good luck!
Thanks for the tips!
Can’t you do car payments? Over here in the UK you can do that.
Not that I know of. You can deduct mileage. You Europeans have it better than us. 😉
I think most financial software will allow you to import directly into your tax software using Tax Exchange Format. Which actually may not be substantially easier or time-saving over paper records. Until you get to that quarterly filing thing, then it might make a real difference.
The regular non-business H&R Block (and I think TurboTax, too) does walk you through deductions. But if I were freelancing full-time and not just doing it occasionally, I’d spring for the business version for the added help. I think that’s definitely what you want if you have to file quarterly.
Ooo, I sound all tax-savvy for someone who just fucked up something really basic and had their return rejected. 😉
Hey Jenz! I was actually JUST going to update that the non-business TurboTax walks you through deductions too (I’m doing that version this year). Thanks for the advice!
Great article. Thanks for the info, you made it easy to understand. BTW, if anyone needs to fill out a form 1099s, I found a blank form here http://goo.gl/jbzPTC. This site PDFfiller also has some tutorials on how to fill it out and a few related tax forms that you might find useful.