We hear it all the time from clients—somebody knows somebody who doesn't pay any taxes on their freelance income; or somebody's got a friend who writes off all their daily donut purchases. Well, while donuts are tasty and sometimes can fuel a late night of work, and not paying taxes sounds really nice, in most cases these are just urban legends or straight-up fraud.
That said, you can definitely do many things to help make sure that you're not paying more taxes than you should be paying. And that's why we're here.
While everyone's freelance businesses and circumstances are a little bit different, here are a few things to think about:
- Keeping track of business expenses and your receipts is the best way to improve your business tax picture. You only pay taxes on your profit, but if you don't know what your expenses are, then you're paying taxes on all the money brought in, instead of just the money left after expenses. The better you track your expenses, the more expenses that you can take, and the lower your profit becomes.
- Contributions to some retirement accounts can also lower your freelance profits. Let us know if you have contributed or would like to contribute to a retirement account and we'll help you explore the options that could benefit your taxes.
- Another option is to consider forming an S corporation. There are many factors to consider before forming an S Corp, and, to be honest, it won't work for most freelancers, but if it applies in your situation it can help lower your self-employment taxes. We've created a simple questionnaire to help you figure out whether an S Corp might be the right fit for you.
Every freelancer’s tax picture is unique, so it's important to get customized information based on your situation. To book an appointment, create an account on brasstaxes.com or email firstname.lastname@example.org for a consultation!