Taxes can be a pain to keep track of when you’re a freelance writer or other professional. If you don’t keep a handle of the situation, you could lose out big in fees and penalties. Take steps to make sure you’re paying taxes timely each year and prevent getting fined from the IRS. The last thing you need, from a financial perspective, is to fall behind.
Paying Taxes as an Online Freelance Professional
Many people work professionally from their homes on the Internet to either supplement income or as full-time careers. In either case, paying taxes is still a requirement that needs to be addressed. As a freelancer, most organizations don’t take out things like social security. At the end of the year, it’s your responsibility to make sure these get paid. Unfortunately, it’s easy to forget about taxes until April 15th and you don’t have the money to pay.
Keep a Second Savings Account
One way to make sure you have enough money to pay taxes at the end of the year is by setting up a “tax” savings account. Put at least 10 percent of your earnings into this account and leave it be until the end of the year. Once you file for paying taxes, use this money to pay state and federal amounts. Not only will the savings account accrue interest throughout the year, but you may have tax credits that can reduce what you pay giving you more of a cushion. Just be mindful that the interest you accrue may be taxed as well.
Using Smarty Pig
Smarty Pig is an online savings account sponsored by Compass Bank. It can automatically pull fund from your bank and squirrel it away. This can be a great way to save for taxes because it keeps it out of your immediate control. It’s much harder to spend this money than if you were to have access to a savings account. The bonus to this is that Smarty Pig will even given you a bonus if you get the remainder of the money back as a gift card. For example, it was giving you 1% on top of your savings if you got the money in an Amazon gift card.
Personally, I use my PayPal debit card for just about all of my local and online purchases. When I want to move money to save it for any reason, I transfer the amount to my checking account – which I completely forget has money most of the time. Since PayPal debit is my primary method for paying everything, I never use the bank card. This keeps the money out of mind until it’s time to pay something big, like taxes.
Being a work-at-home professional can save you from commute times and road rage. While the prospect of being a freelancer may be ideal, forgetting about your taxes can add stress levels higher than if you were to drive I-25 during rush hour in a heavy rain storm. If you forget to set the money aside, tax professionals may be the best course of action to help you get back on track.