Taxes may be the last thing you want to think about as a freelancer, but they’re still really important to pay attention to. Looking back, did you maximize your business expenses and keep your accounts in order? If not, there’s still time to set yourself up for success come tax time next year.
1. Spend Money (on the Right Things) Before Year’s End
Qualifying business expenses can help reduce your taxable income for the year. If you’ve pined for a new laptop, now is the time to buy it. Not only will it count toward the expenses you deduct on your taxes, but you could get a great deal on it, since holiday sales are happening right now
2. Max Out Your Retirement Contribution
One thing that’s a drag about being a freelancer is that you don’t have an employer matching your 401(k) contributions, nor automatic withdrawals coming out of each paycheck. That means you have to be on top of your retirement savings. Did you realize that contributing to your retirement plan gets you a tax credit of up to $5,500 a year for a Roth/Traditional IRA? It’s better to put that money aside to earn interest for your retirement than to give it to Uncle Sam!
If you’re scrambling to put money in your retirement account now, it’s a good idea to set up an automatic contribution in 2016 to make it easier to hit that limit and maximize your tax credits.
3. Collect All the Money You Can Before the End of the Year
The more money you can collect before 2015 rolls over, the fewer loose ends and unpaid invoices you’ll have to start the year out with. Also, some of your clients may need to use up their budgets this year, so make it easy for them!
4. Pay Estimated Tax Payments
Waiting until April to pay what you owe on taxes can leave you in a cash crunch. Instead, pay your estimated tax payments quarterly to make it easier and put less strain on your finances.
Paying on your state taxes now can also benefit you on your taxes next spring. Paying them this year lets you deduct the expenses on your taxable income for 2015. Bonus!
5. Choose a Better Business Structure
Just because you operate as a freelancer doesn’t mean you have to use the sole proprietor business structure. In fact, an LLC or corporation has more tax benefits. Also, these structures will separate your personal assets from those of your business, which keeps you protected.
6. Talk to an Accountant
Sure, you’ll need to meet with an accountant or tax expert in the spring to file your taxes, but being proactive and meeting now can help you strategize to lower your tax bill. It’s well worth the effort!
7. Close an Inactive Business
If you stopped operating a business this year, you’ve got to take steps to officially shut it down, especially if you were operating as an LLC or corporation. There are Articles of Dissolution that you need to file to avoid penalties and fees, and you may also need to terminate business licenses you hold.
Trust me: taking care of these tax tasks now will make you happier when you file your taxes in 2016!
Ready to take advantage of a tax-saving business structure? Contact CorpNet to get incorporated today!