When it comes to taxes, are you deducting everything you can?
In the first meeting with her accountant, Bryn had a big surprise:
She had a percentage in mind for Uncle Sam, but says,
“It was significantly higher than I expected… I knew that I needed to account for self-employment tax and social security; what I didn’t realize is that, as an independent contractor … I need to pay my income tax quarterly… When I was employed by someone else, it was sort of off my radar…”
Having to pay a much bigger percentage than she expected was a “rude awakening” for Bryn. Fortunately, she had built up a financial cushion before becoming self-employed. This cushion was a huge relief.
Now, Bryn has a different mindset. Going forward:
- She realizes that she can expense a lot more than she thought. All of a sudden, knife sharpening, food for recipe development, and props become expenses.
- Every time a paycheck comes in, half goes into a tax account (just to be safe).
- Bryn is now very careful about keeping receipts and updating her spreadsheet on “Finance Friday.” This way, when she files next, her estimate will be more manageable and realistic.
Have you experienced any tax surprises?
For guidance when it comes to taxes, we adore June Walker, tax advisor for the self-employed. Read her guest posts on the Creative Freelancer Blog and check out here books, Self-employed Tax Solutions + Five Easy Steps, and her free resources.