Help me not owe a bazillion dollars in taxes next year.
February 27, 2013 10:10 PM Subscribe
Somewhat unexpectedly, I find myself working as a full time freelancer. Help me anticipate the tax situation.
posted by Sara C. to Work & Money (13 answers total) 9 users marked this as a favorite
I have done the freelance income song and dance before, but up until now it's been an occasionally significant side gig (less than 10% of my total income). Now it looks like the vast majority of my 2013 income is going to be of the 1099-able kind.
How do I manage this without just sort of sweeping it under the rug and discovering next April that I owe thousands of dollars in taxes? I'm thinking of opening a separate savings account just for tax withholding. Is that the right thing to do? How much should I set aside? Should I do quarterly estimated taxes or pay in advance somehow? What's best practices here?
Luckily most of my income is coming from one client, who I will be invoicing regularly, and who pays promptly, so I probably don't need to deal with spreadsheets and shaking people down for money. I mainly just need to figure out how to make it right with the feds.
It doesn't look like I'm going to be making more money, on the whole, than I did in previous years -- if anything, I'm taking a pay cut. It's just that something like 75% of it is going to come as freelance income with no taxes withheld.
So far I'm doing fine with other freelancer issues like time management, workspace, routine, etc. and am not too interested in advice about health insurance. My main concern right now is financial.