Learning financial managment

Freelancers

  • self-employed status impacts tax situation
  • what kind of return: LLC, individual (1040)
    • individual (1040) or individual LLC
    • partnership/multiple member LLC,
    • corporation: C-corp, S-corp
  • set aside enough tax money: in a separate savings account
1099s
  • $600+ must report income on personal tax return (1099-MISC)
  • need 1099 from client before 2/2
  • file 1099-Misc if hired other freelancers
1099 contractor
  • double taxed as employer and employee
  • $400+ annually: pay self-employment tax in addition to income tax
  • 92.35% tax on self-employment
Terms
  • net earnings: gross income – ordinary/necessary/business expenses
quarterly estimated payments
  • 4/15, 6/15, 9/15, 1/15
  • put aside money out of every freelance payment
  • based on income history, estimate tax payments
expenses
  • rules: home office deduction – room must be solely for business-related activities
  • can deduct a portion of household expensesL mortgage interest, rent, utilities, insurance
record keeping
  • all receipts and records related to income and tax payments
working with CPA
  • ensure take advantage of all possible tax deductions and credits
  • advice on how to structure business and personal finances to lower tax bills
  • CPAs are tax deductible
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