Successful Blog

What All Freelancers Must Know About Tax Season

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By Adria Saracino

To the new and veteran freelancer alike, tax season can be a time of dread. While there are many tax benefits to be taken advantage of, it can be difficult to navigate the maze of regulations surrounding each deduction–not to mention you have to make sure you’re sending all of the correct forms to the correct places.

But it doesn’t have to be a complete headache — not with the right resources. That’s why we’re recommending the seven tips below, which cover all of the essentials, as well as the documents available in this extensive tax resource center. With these two sources, you’ll find answers to all of your most burning freelancer tax questions — and a few you didn’t even know to ask.

1. Know What Taxes You’ll Need to Pay

If you’ve ever worked directly for an employer, you’re probably used to paying income, social security and Medicare taxes. As a freelancer, you’ll also need to pay a self-employment tax. This is because you are your own business, and therefore have to match your tax contributions in the same way your employer would have, for a total contribution of 15.3%. That’s 12.4% for social security and 2.9% for Medicare tax.

You’ll also have to pay an income tax, for which you can use your last year’s rates as a guide, or you can check the IRS site for income bracket cutoffs. Lastly, it’s important to check with your state revenue department and municipality to determine whether or not they are expecting taxes from you as well. For most freelancers, you will make the bulk of these payments in the form of estimated taxes at the end of every quarter — that’s the 15th of every January, April, June and September — using form 1040-ES.

2. File the Correct Forms

Every time a new client hires you as a contractor, they will have you fill out a W-9. That’s so that when tax season rolls around, they can send you a 1099, which will state the amount of money they’ve paid you. Note: You won’t receive this form for total income of less than $600.

You may be used to filing a 1040A or 1040-EZ form; as a freelancer, you’ll have to switch back to the original 1040 form, as you’ll be reporting self-employment income. To account for taxes related specifically to your business you will also need to file a Schedule C, though those with relatively simple businesses like writers or graphic designers will be fine filing a less complex Schedule C-EZ.

Lastly, you will need to calculate your self-employment tax on Schedule SE form.

Note: These forms and types of taxes paid will differ slightly for freelancers who have filed as a corporation — something all freelancers should consider for tax and liability purposes — but that is an article unto its own.

3. Take Advantage of Deductions

Now for the fun part! There are a number of juicy deductions available to freelancers. That said, it’s important to know the difference between what counts as a business lunch and what counts as a “ridiculous splurge that will anger the IRS.” And we can’t say it enough: keep your receipts.

  • Office Supplies: From the furniture in your office to that colorful new packet of Post-Its, office supplies are fully deductible. However, if you’re just starting out, you may want to brush up on the differences between current and capitalized expenses.
  • Advertising and Internet Expenses: Billboards, fliers, leaflets, online ad campaigns, and the internet connection itself. Add the expenses up, and deduct away.
  • Professional Services: Whether you’ve employed a bookkeeper to keep track of your finances or you’ve taken a continuing education course to further your career, the costs you paid are all deductible.
  • Insurance: If you have business insurance, it’s fully deductible. Health insurance is as well on form 1040 as an adjustment to income.
  • Home Office: You can deduct a percentage of your rent and utilities, based on the size of your home office.
  • Travel: If you travel to clients, track your mileage for a deduction at the 2012 rate of 55.5 cents per mile. Travel for business trips is also deductible, as are any meals and hotel rooms related to business travel.

This is just a sampling of the deductions available. You’ll find a more extensive guide here.

4. Be Wary of Audit Red Flags

One big caveat to all of these deductions: the IRS keeps its eye on freelancers for any kind of fudging, so you’ll want to make sure you’re not setting off alarm bells. A few common triggers include:

  • The Home Office Deduction: This is by far one of the most commonly abused deductions, partially because the regulations concerning just what you can and cannot claim are both strict and a little difficult to understand. The gist of it is that the area you claim as a home office needs to be used exclusively for business, and you need to stick quite tightly to obvious borders. Read more about these regulations in IRS Publication 587.
  • Mileage: While we highly recommend you deduct mileage, if you use your car for both business and pleasure, you’ve got to do a good job of tracking and separating the two. Keep in your car a little book with columns for start and end mileage, date, and description.
  • Meals and Entertainment: Again, deducting for this is perfectly acceptable, as long as it’s within the realm of reason. Deducting for a good meal with an important contact is fine, but perhaps not if it costs several thousand dollars. Use a good dose of common sense to avoid this trigger.

5. Sign Up for Electronic Filing

Repeat after us: filing your taxes electronically will make your life infinitely easy. Through the Electronic Federal Tax Payment System, you’ll even be able to file your estimated taxes. It takes a little time to set up, but will be well worth it in the end.

6. Use Tax Software Made for Businesses

Likewise, tax software can make your life so much easier, as can accounting programs that automatically create reports and forms for you. File for free through the IRS, or compare a number of good tax programs here.

7. Hire an Accountant

You’re in business for yourself, and you may very well enjoy being totally self-sufficient. But hiring an accountant can mean outsourcing many of these steps. It can also ensure you’re not missing anything, especially in terms of new tax laws. Lastly, a good accountant will find you deductions and loopholes you could have never known existed (unless you wanted to read through a mass of byzantine tax documents in your free time…). All of these things make hiring an accountant an expense that pays for itself, at least in the beginning of your freelance years. Just make sure to do so early before they book up.

Take-Away

Filing taxes as a freelancer can be complicated, but doing so allows for numerous personal benefits. Take the time to learn the regulations and get to know the forms so you can take advantage of all there is to offer and also cover all of your bases.

Still Confused? Check Out This Tax Checklist

Author’s Bio: Adria Saracino is a marketer, blogger, and occasional freelancer. When not consulting on best business practices, you can find her writing about style on her personal fashion blog, The Emerald Closet.

You Might Be the Problem If…

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By James Ellis

Sales sluggish? Traffic down? Conversion rates dipping? Boss seeming a little gruff with you lately? Fewer smiling customers? More customer comments than you’d like?

They all have a root problem and a root solution, but sadly, you’re not going to like it.

The problem is you.

Not the editorial you, the plural you, the groupthink you, or even the royal you. You. The person reading this. You’re the problem.

That’s not 100% true. You didn’t cause the housing crisis and the fiscal cliff. You didn’t create all the public uncertainty slowing economic growth. But you are still the problem.

Why? Because the only person you can control is you. If you claim it’s your boss’s fault, that means you get to pass the buck. If you decide lower conversion rates are because your customers are dumb, that’s an excuse to not try and fix it.

But you can’t just “fix it,” can you. Especially if you believe that the fault lies with someone else. Making it your fault and your problem means that you get to do something about it, not just blame and move on. Making it your fault means that power lays in the one place you can use it: within you.

And that’s not just some self-help/new age/zen-esque notion. The problems with your business and site are usually you, in that you haven’t figured out how to build a site for your customers. You built a site for you.

The joke among web designers and graphic artists is that the client always wants to logo bigger. Why? The logo doesn’t ever help the customer, it’s bigger to stroke the ego of the client. Every pixel of space added to the logo is a pixel taken away from something the customer might actually want. Every interstitial ad is ten seconds you stole from your user. Every home page that touts how much you appreciate your customer is a another click the customer has to slog through to get to their order status.

When you send marketing emails, do you fill it with junk that you want the customer to know, or do you fill it with what the customer actuality wants? Is your web site showing products that you want the customer to know about, or the products your customers came for?

Do you even know the difference?

Don’t you love it when two airlines merge and they tell you that they did it for your convenience. It wasn’t to lower operating costs and increase margins while bringing standards of customer service to ever-falling levels? This is what a company calls convenience?

Do you know the difference between “important customer emails” and “spam?” I bet the standard you have for your personal emails and those your company sends are different.

And that’s why you are the problem. Because you are the only person who can stand up for what your user wants and actually give it to them. They will reward you later with more sales and better word of mouth. But for right now, as the calendar changes over, the burden falls on you to fix your problem.

How will you become the solution?

Author’s Bio: James Ellis is a digital strategist, mad scientist, lover, fighter, drummer and blogger living in Chicago. You can reach out to him or just argue with his premise at saltlab.com.

The Secret to Progress You Can Start Today

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Rosemary O’Neill

There is one tiny change you can make to your daily life that will have a huge impact on your success. In work, in relationships, and in family life. Lean closer, because I’m going to have to whisper it.

Look back.

The Secret to Progress You Can Start Today

My car has one of those built-in video screens so that I can see what’s behind me when I’m backing up. Skateboards, basketballs, and even the occasional kid have all survived my driveway because of this rear-vision feature.

We’re all told constantly to plan, set goals, look ahead. And in these next few weeks you’ll be barraged with people telling you to sit down and create a roadmap for 2013.

But before you do that, it’s essential to grab a cup of coffee and review 2012. How can we ever savor life, see our progress, and learn from our mistakes and successes if we don’t ever take a moment to look for them?

Daily Gratitude

At the end of every day, as you’re settled in bed and closing your eyes, take a couple of minutes to think back and be grateful for the day just passed. Give yourself a high five for any accomplishments.

Weekly Review

At the end of every week (I do it on Sunday afternoon), sit down and actually write out your successes. Write down lessons you learned during the week. Write down things you meant to do but didn’t and figure out why. Write down things that happened that made you feel awesome.

Monthly Check-in

At the end of the month, glance through your weekly review notes, as a reminder of your progress and things you’ve learned. It will solidify the lessons learned and give you a boost going into the coming month.

Yearly Wrap-up

Almost everyone starts the year with some sort of vision or goals (let’s not say resolutions anymore, ok?). But do you ever sit down at the end of the year and see how you did? So maybe you didn’t finish that novel, but you did publish your blog three times a week. It’s ok to celebrate that. And since you have your weekly reviews in front of you, you can really see and remember everything. Before I started writing these things down, I wouldn’t have remembered some of the minor victories that really stack up.

Do you take time to look back? Do you have any review tips to share?

Author’s Bio: Rosemary O’Neill is an insightful spirit who works for social strata — a top ten company to work for on the Internet . Check out the Social Strata blog. You can find Rosemary on Google+ and on Twitter as @rhogroupee

Thank you, Rosemary!

You’re irresistible!

ME “Liz” Strauss

3 Ways to Recharge Your Business Creativity

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Stephen Key

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Why Letting Your Inner Child Out Can Benefit Your Business

How many times have you watched your son or daughter’s imagination shine as they play with their friends or by themselves? Children are incredible dreamers and creators who have no inhibitions about letting creativity dictate their actions. To me, entrepreneurship is synonymous with creativity. People often talk about business and art as if the two couldn’t be more separate, but both celebrate the value of looking at the world a little differently than everyone else. The best entrepreneurs see possibility and opportunity where others have failed to, because they’re able to spot unique and powerful ideas that will resonate with consumers. Developing and celebrating your creative energy can benefit your business in countless ways.

I’ve spent the past twenty years bringing my product ideas to life. Thinking creatively has helped me invent and innovate, but even more importantly, I’d argue, it has helped me problem solve. Business owners are constantly surprised by new and different conflicts to overcome. You’ll never be able to predict them all. The more comfortable you become with quickly brainstorming solutions, the better your business will be. There’s never just one answer. And that’s why being able to think outside the box when your business is faced with a seemingly impenetrable roadblock is important. Somewhere along the way most of lose the ability to dream and imagine as easily as we did as children; being able rekindle these skills will help your business.

3 Ways to Recharge Your Business Creativity

I don’t believe that certain individuals are inherently more creative than others. The belief that ‘you’re just not creative’ is an excuse. We’re all creative! As children, we’re all able to dream and imagine with abandon. But like any other skill, creativity requires practice, commitment, and inspiration. I’ve found that playing games helps recharge my creativity.

The first one is, ‘What If?’ When I try to imagine new product ideas or encounter a problem in my daily life, I allow myself to ask any question I want to. What if we lived in a world that __? What if I were able to __? There are no right or wrong questions (nor answers!). I remember my own three children asking me question after question when they were little. Questions lead to answers, answers lead to more questions, and creative juices flow during the process!

The second game I play I call, ‘Mix and Match’. I combine several ideas together, even if they don’t seem to make immediate sense. Someone really hit the nail on the head when they matched a camera and phone, after all…. Some of the best ideas actually combine existing concepts or products in interesting ways. Think about all the times you’ve watched your son or daughter play with their toys in unique ways. They are no strangers to mixing and matching to make things new and exciting.


The third creative game I use is called ‘Solve It’. What do you wish was made better? What would you do to change it? Some products and services have been around for so long, we no longer even think about what it would be like if they were different. Don’t take any assumptions for granted, and stop subconsciously assuming what is and isn’t possible.


And finally, don’t forget to get inspired. Seek out friends, family, and peers who, like loved and empowered children, believe that anything’s possible and embrace the alternative. Some people are more receptive to new ideas than others. At the least, find someone whose first word isn’t always ‘no’.

Break out of your normal mold and schedule. How can you imagine something different and unique if you always do and see the exact same things? Change your route to work. Try a new restaurant instead of your neighborhood favorite. I know your schedule is hectic, but make time to read a new book or magazine, or watch an interesting film. Exposing yourself to new ideas and ways of thinking will jumpstart your own creativity.

Above all, allow your creative inner child to emerge to help bring your business to new heights.

What do you do to inspire your creativity?

Author’s Bio:
Stephen Key writes about licensing and small business at www.inventornotes.com. He is also author of One Simple Idea and One Simple Idea for Startups and Entrepreneurs. You can find Stephen on Twitter as @inventright ()

Thank you, Steven. Love your thoughts on inspiring creativity!

–Me “Liz” Strauss

Do You Have a Clue on Finding the Right Temp Worker?

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With many businesses in a quandary these days between hiring more help and cutting back on expenses, the issue of hiring temporary workers oftentimes comes to the forefront.

Should we disperse more of the work among our full-time employees? Should we reach out to a temp agency to bring in people for a period of time? Is it better that we place our own ad looking for temp workers? These are just some of the decisions that come into play for the business man or woman trying to best organize their staff.

Over time, the expense of hiring temp workers is often cheaper than the cost of bringing on permanent employees with benefits.  In the short term, it typically proves to be cost-efficient to hire a temp.  Meantime, for jobs that figure to last six months or longer, it may pay to bring on a full-time employee.

If you find yourself debating this issue, there are a number of things to keep in mind before you pull the trigger on such a decision.

They include:

1. How long will I need the help? – First and foremost, determine how long you will need temporary help. Is it just for a few days to catch up on business? Is one of your full-time staff taking a vacation or longer leave of absence? Could the temp help possibly be part of our team for several months? Knowing the timeline goes a long way in deciding who to hire;

2. What type of temp worker do I want? – Temp workers come in all varieties, so which one will be best for your office? Is your office very conservative, meaning it is mostly all work and no play? If so, you may be looking for a little older employee who has been around for a while and can get right down to business. Then again, if your office is very laid back and even fun to work in, maybe someone a little younger who brings a lot of energy and spirit to the job. There are older workers who are fun to be around, just as there are younger workers who can roll up their sleeves and work hard for you. Knowing your office culture will help you in determining just the right fit. The last thing you want is hiring someone that will throw off the office chemistry, creating more problems than solutions;

3. Will the temp worker need a great degree of training? – One of the other important aspects to the decision is the necessary experience level of the temp worker. Are you planning on bringing them into a challenging situation where skills are of the utmost importance? If so, do you have the time to train them? If you are more in need of general office work, this issue should not really be a problem. While a temp agency should supply you with qualified workers, you do not always get what you ask for;

4. What is our pay scale for temp workers – Since just about no one works for free these days, do you know what you will pay any temps who work for you? While you are likely looking to save money in today’s economy, short-changing a temp worker could also lead to so-so results. Make sure you and the temp agency (if you are working with one) are clear on expected salary for the individual that will be filling in at your business;

5.  Finding the right temp agency – Lastly, locating the right temp agency to work with is critical. In order to improve your chances of finding the right one, take the time to find one that meets your particular needs. Review their websites to find out how long they’ve been in business, their “mission statement” and the kinds of temp employees and services they offer. The last thing you need is getting sent a few “lemons” before finding the right fit for your business.

Photo credit: excelle.monster.com

Dave Thomas has more than 20 years’ experience as a writer, covering news, sports, marketing, SEO, press releases, social media and more. You’ll find Dave at: http://www.examiner.com/news-in-san-diego/dave-thomas

4 Steps to Declare Your Independence

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INDEPENDENCE


Yes that’s me.

My birthday is July 3. The country’s birthday is July 4. I have a cousin who’s 361 days younger than me.
Those three facts added up to personal birthday celebrations that were often combined and moved around because of the holiday and the idea that one party — usually a picnic — meant less disruption for everyone.

As I got older, I reached adult birthday status much earlier than my much older brothers — whose birthdays fell on days that had no competition with other events. They got their private parties well through high school. My birthday more quickly became a piece of another event rather than my own day. We’d go see fireworks or a parade to celebrate, but those events were bigger than my birthday.

4 Steps to Declare Your Independence

The fact that I was born on the Eve of Independence Day was never lost on me. I was already saying “My birthday is the day before 4th of July.” when I was kindergarten. My birthday couldn’t compete. I was never at the center of my birthday. Being a painfully shy child, I have to think that worked for me.

But there comes a time in any life that we have to claim our own independence. We have to learn how to make ourselves the “center of our own life’s plan,” or we’ll end up spending the time of our life without actually living it. Here are 4 steps to declare your independence right now.

  • Decide who you are. At first it seems natural to let the people around us define us. Our family teaches us how to be social. Our teachers and peer groups tell us what they see. The universe is larger than the thoughts and images those groups put in our minds. Our potential is too. Don’t rely on the observations of the world to tell you who you are. They haven’t lived your life. The world can’t get together to take a vote on who you are. Choose your own best true story. Decide and show them instead.
  • Be that person now. Don’t try to be that person. Don’t work toward some future date when you’ll know you are. None of us have enough future to waste on getting there. You know what you value. You know who you admire. Define yourself with those and be what you’ve defined immediately.
  • Surround yourself with people who recognize you. Use your values to choose the people you trust. Shared values reinforce themselves. Time is unrenewable. Spend your time with people who make you feel proud to be who you are. You’ll know them because you’ll never have to focus on what you want or need. Being with people who see, hear, and understand us, frees us from having to highlight, underscore, or prove who we are. It move us away from living through self-consciousness, self-centeredness, and a conflict of selfishness with selflessness to consciousness, centeredness, and a balanced view of ourselves.
  • Own the good things about you. Influence yourself. Get to know and value what others see and value in you. That’s how you’ll grow what’s good in you naturally. You can’t share or give what you don’t truly own.

Somehow we have it backwards. We live as if at the end of our life, we’ll know …

who we are.
what we’ll do.
where we will end up.

Decide those things first. — The Problem Isn’t Not Knowing What You Want to Do …

Before I found my own independence, sharing my day always felt a bit disappointing. Hearing folks say, “enjoy YOUR day,” didn’t resonate with me. Yet once I decided who I am, began to live that, focused on people who truly see me, and learned from them what I offer, sharing my day — any day, any amount of time — became as easy as breathing. That’s how I learned to live the moments of my life.

Once I declared my independence, I learned how irresistible the people in my life truly are.

Have you declared your independence?

Be irresistible.

–ME “Liz” Strauss
Related: Top 10 Ways to Start Living Your Life