Monday, June 4, 2012, AM | Leave Comment
We all know it’s hard to get a job these days whether you have lots of experience under your belt or just right out of college. However, some recent college graduates are finding that it’s easier to get freelance or temporary assignments. They must do certain tasks above and beyond their specific employment duties as well.
From bank accounts to insurance to retirement planning, here are some money tips for freelancers.
Pay Estimated Taxes
Quarterly payments to IRS are one big area that skips first-time freelancers minds. You should set aside 15.3% to cover Social Security and Medicare taxes for every payment you receive.
Then, estimate your tax bracket for the calendar year and take out the appropriate amount.
Register Your Business
Most freelancers are sole proprietors without employees. The IRS publishes a guide for sole proprietors paying federal income taxes.
Some states and local governments have their own rules regarding how and when to register a business.
Call the local Chamber of Commerce to find out what paperwork your area may require so that you qualify for all the tax benefits you are entitled to receive.
Open a Retirement Account
Freelance workers typically are rarely eligible for 401(k)s and instead will need to open their own retirement accounts. By doing so, you will get both short- and long-term benefits.
Short-term, you will be able to deduct the amount you put into retirement savings from your income taxes.
Long-term, your savings will grow larger with more time to compound.
Buy Health Insurance
Medical costs contribute to about half of all personal bankruptcies, and freelancers often have a hard time finding health insurance that they can afford.
Some organizations, like the Freelancers Union, offer the self-employed group health insurance plans that generally have lower costs than you will pay in the open market.
Keep Good Records
As an independent business owner, you are eligible for tax deductions that many salaried employees cannot claim.
Keep track of everything you spend on with receipts in case the IRS questions your deductions.
Open a Business Checking Account
It will be easier to keep good records if your business expenses are separate from your personal ones.
It’s not required by the IRS, but it definitely helps in terms of keeping your books straight.
In a Nutshell
There you have it. Six important tasks you should do as a freelancer.