Let’s Talk About T*xes…
How to prep for tax season without losing your mind
We’re around half way through the year. If you haven’t gotten your tax sh*t together just yet, this newsletter is for you.
And if the mention of the word t*xes makes you sweat, don’t panic. Everything is figureoutable.
In today’s newsletter:
Tips for tax season
Estimating your tax liability
5 exciting opportunities
Tips for Tax Season
Here’s the quick, to-the-point list of must-haves to prep for tax season:
#1: Separate Business and Personal ASAP
Keeping business income separate makes it easier to prove your business income and expenses. If everything is muddled in one account, it can be challenging to prove what is/isn’t business income.
#2: Keep Two Lists – One for Invoices Sent, and One for Invoices Paid
If you don’t keep track of invoices, you’ll be scrambling to figure out which ones haven’t been paid. However, you’re only taxed on income that hits your bank account. So, make sure you have a record of both.
I keep a Google Sheet list of all the invoices I’ve sent out, the date I sent it, the amount, and the client that owes me. Once it hits my bank account, I check it off so I know it’s paid.
Alternatively, you can issue payment links through Stripe and have your clients on a subscription. So, instead of having them do a wire transfer each month, the funds will come out of their account automatically and you’ll get paid on the same day each month.
#3: Decide on DIYing vs. Hiring an Accountant
Once tax season arrives, accountants will be booked up. So, it’s better to think ahead and start scouting out an accountant now if that’s the route you want to take.
Here are the main options we recommend:
Accountant → Use the IRS’s directory to find an accountant or ask around with friends and family. This is a more expensive route, but it’s perfect for people (like me) that are terribly afraid of accidentally committing tax fraud.
Collective → This is a completely done-for-you option. Collective will handle the bookkeeping, give you financial reports, give you access to a tax advisor, and file your taxes. It’s pricey though — a minimum of $254 per month. This is ideal for full-time freelancers, or people making a significant amount of money.
Whatever you choose, start looking at options now before the tax season panic rolls around.
#4: Save For Taxes Ahead of Time
It’s a general rule of thumb to save 30% of profit for taxes. This will vary depending on where you live, how much you make, and a variety of other factors.
If you don’t already have a way to track profit, find a way to do so, and make sure you’re setting aside funds for taxes.
#5: Know What You Can & Can’t Write Off
The government acknowledges that for a business to grow, there are a variety of expenses that simply have to happen. Because of that, they allow businesses to write off those expenses, which reduces how much you owe in taxes. (music to my ear, and probably yours, too)
Here’s a few things you might not know you can write off:
Parking and Tolls: Photographers and videographers — are you writing off that expensive parking cost when you travel to a shoot?
Educational Expenses: If you’re course junkie, or if you’ve been debating splurging on a business coach, you can write ‘em all off.
Phone and Internet: If you need a phone or the internet to do your job, you can write off a portion of your bill.
Car Insurance, Maintenance, and Depreciation: If you use your car to get to and from work sites (makeup artists, photographers, social media managers, etc.), you can write quite a bit of car expenses off.
Clothes: If you wear something just for work — like a musician’s costume or an artist’s this-can-get-paint-on-it outfits — those are write offs.
Grooming and Appearance Expenses: If, and only if, you are an actor, model, or performing artist. It has to be necessary for the role you have to play or for a certain persona you maintain. Read more on this one here.
If you realize later on that an expense could’ve been a business expense but you used personal funds for it, don’t worry. You can go back and write it off — just ask your accountant for help.
If you’re not quite sure how much you’ll owe in taxes, try using an LLC Tax Calculator. Keep in mind that it’s an estimate, not a perfect measure of what you’ll owe. Still, it’s useful to give you a general idea of what you’re in for.
We’ve also got a more in-depth guide to taxes as a freelancer/independent worker. We promise it’s designed to be as painless as possible (we will not just spit tax terms at you. swear.)
Five new opportunities this week ⬇️
For Eleads Media. You’ll write for 2-3 clients at a time.
Must have knowledge of the software and tools used for cold outreach. *They are not looking for a content writer!
Needed for 1 day this week and for 1 week in July.
Need to be fluent in Spanish.
Pay the equivalent of $30-$100/hour+.
Want to see a specific type of work? Just let us know.
And want more to see more job opps? Peep at the end.
What I’m Thinking About
Doing your own thing — whether it’s a side hustle, full-time freelancing situation, or gig work — comes with a variety of lessons. I’ve found the financial side of things is where a lot of the lessons hit hard.
Next week, I’ll share with you some of the biggest financial lessons my team and I learned. I’ve dug up lessons from newbie freelancers to multiple-six-figure entrepreneurs, so it’s a pretty interesting mix of lessons.
In the meantime, think about it. What’s the biggest financial lesson you’ve learned so far?
See ya next week,