This isn’t going to be the typical “tax tips” post. I’m not going to advise you to try to remember any business expenses you forgot about, or remind you that filing electronically could get you a faster refund. Instead, I’ve got one huge piece of advice for freelancers and solopreneurs filing taxes which could save you a lot of money.
Learn how the tax system works
Accountant Katherine Pomerantz has a comprehensive guide to the freelance tax-filing process at The Creative Independent, starting with a note on the importance of proper tax planning. While her advice may centre itself on U.S. tax law, this nugget is an important one:
The most frustrating thing about my job is creatives who say “good enough” when it comes to taxes. Often these artists feel they are too stressed, confused, or busy for proper tax planning, but paying too much money in taxes can hurt you both personally and professionally.
As a freelancer who has definitely paid too much money in taxes in the past, I wholeheartedly agree. One of the best things freelancers can do for their careers is to learn how the tax system works.
If I’d known about the intricacies of tax during my freelance years, I could have put some of the money I owed the government into my debts instead, and gotten an “above-the-line” tax deduction ” which in turn might have reduced the amount I paid in healthcare premiums, since those credits and subsidies are dependent on your “below-the-line” adjusted gross income in America.
While I always advocate for working with a CPA no matter where you are in the world, I’m also going to advise you to learn as much about your local tax system as possible ” and learn how to use it to your advantage.
Take the time to understand how freelance taxes work. Consider it part of your job, schedule time for tax planning into your daily and monthly workflow, and adjust your hourly wage accordingly.
This easy tax tip is, of course, actually advice to also not file your taxes last-minute. When you do your taxes quickly, without considering all of the potential tax advantages available to you, you run the risk of losing money.
And, from one freelancer to another, that’s not money you can afford to lose.