New to freelance writing and need help with taxes.

October 27, 2013 3:56 PM

I am new to the world of freelance writing. I have a regular full time job but have started freelancing on the side a couple months ago. Right now, I make about $400 a month from various jobs. Still a small number but I'm expecting to ramp this up a bit so I'd like to learn more about taxes and how/when I will need to start paying. When should I start reporting my taxes? I assume I will need to pay quarterly, how will I go about this? What forms? I'll consider hiring a tax advisor if I start making more from writing but for now, I'm just trying to get my feet wet and understand my tax obligations. Thanks!
posted by cm1088 to Work & Money (10 answers total)

(Answers to this question will depend largely on where you're located.)
posted by thisclickableme at 3:59 PM on October 27, 2013

$400 a month is plenty to get a huge headache. The thing with taxes for freelance work is that the single biggest added complexity is when you start freelancing at all; adding a second or third or fourth or fifth freelance income stream is, broadly speaking, just "more of the same" whereas the change from "just a full time job" to "salary plus freelance" is where things get complicated.

Go get an accountant right now. Don't wait until you're drowning to learn to swim.
posted by Tomorrowful at 4:01 PM on October 27, 2013 [1 favorite]

I am assuming you are someplace in the US. This is a complicated situation but really not necessarily into "get an accountant" territory unless you are bad/undisciplined with money

- Presume you will have to pay back 25% of what you make in taxes (since you are paying into your own social security)
- Start considering itemizing deductions or at least keeping track of them
- You can worry about paying quarterly next year
- TurboTax can talk you through this for this year and is VERY worth the money
- Get a good book (or a good website) about the specifics. It's good to know what to look out for and how to assess things like a home office and figure out when to buy a computer, that sort of thing.

I've been making freelance money (usually in addition to regular money) for over a decade and I do my own taxes with TurboTax's help. You can decide which path you wan tot go on but you don't automatically need professional help as you're just getting started, though it can make things a lot easier for you.
posted by jessamyn at 4:18 PM on October 27, 2013 [1 favorite]

Response by poster: I'm based in New Jersey.
posted by cm1088 at 4:19 PM on October 27, 2013

I had this whole thing typed out and realized it all boils down to this:

1. Don't fuck yourself in the head over taxes. Do what you love and make an honest effort at your taxes and you will be fine.

2. Don't give up another 10-20% of your gravy income to an accountant each year.

Done.
posted by thorny at 4:48 PM on October 27, 2013

Here's the IRS hub for self-employed people. In general, your clients should send you a 1099 form at the end of the year, stating what they paid you. This will help you figure your taxes, which will include self-employment taxes - about 15%. You also want to keep track of all of your expenses, because you can deduct many of them. The IRS considers freelancers like yourself to be "independent contractors" so use that term in your googling to get more info.
(Not a CPA, just someone who has had to deal with this.)
posted by Biblio at 6:30 PM on October 27, 2013 [1 favorite]

It might be worth it to take a small business workshop at the local community college just to get a sense of how to manage your finances in relation to freelancing. You need to be keeping track of your deductions -- which can range from Internet to mileage -- very closely. Here is a list of common tax deductions for freelancers.

You should get a 1099 from your larger clients. I have smaller clients that don't send me a 1099 -- I just list that income on my taxes. I file taxes once a year like everyone else. It's really not a big deal.
posted by Ostara at 7:24 PM on October 27, 2013

Taxes can be a freaking nightmare for a freelance writer. Trust me, I know. Just as a for-instance, do you have a business license to work as a freelance writer in your town? You'll need one, and if you don't have on already you could get hit with a penalty.

If you can possibly afford it, get a good accountant to handle this stuff for you.
posted by Ursula Hitler at 8:28 PM on October 27, 2013

In my experience, bookkeepers and accountants work at a flat rate to manage this monthly for you. My bookkeeper does everything for me for $20.00 a month. That's it.

The Federal Government requires you to report everything over $600 from each individual employer. That's what the 1099 is for. Wait and see what the end of this year brings to set up your tax payments. DO save about 25% of what you make for tax purposes this first year, mostly because NJ gets some, too.

Your bank will set up an account for you to pay taxes quarterly. My bank charges $3.00 a month for my tax deposit account. Those payments are forwarded electronically each quarter based on deposits, and I can produce a printout on the computer at any time.

If your work-related expenses average out to be greater than $10 per day, track them.
posted by halfbuckaroo at 3:00 AM on October 28, 2013

do you have a business license to work as a freelance writer in your town? You'll need one, and if you don't have on already you could get hit with a penalty.

This is location-dependent. You can use the Small Business Administration's online Permit Me tool to get a good step by step list of instructions to figure out what you will need along these lines if you are going to be a freelance writer. Their website is generally excellent, here is their page about tax paperwork. Where I live I do not need a business license. When I lived in Seattle I needed one and certain places might potentially only want to to pay someone with a local business license (unlikely but I've seen it before)
posted by jessamyn at 11:14 AM on October 28, 2013