Guide

Explore all of our curated freelancer resources. 

Prioritizing Debt Paydowns

If you are like most people starting your career, it’s likely that you’re carrying some debt. People often ask what debt they should prioritize paying down. A good place to start is by knowing which debt is the most expensive – i.e. which is charging you the highest interest rate!  Payday loans are some of…

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The Importance of a “Rainy Day Fund”

If there is one thing the COVID-19 pandemic showed, it’s the importance of having a “rainy day fund.” Life is unpredictable, and having some extra cash on hand to help tide you over is not only responsible, but can be a big stress reliever. While comfort levels will vary from person to person, financial advisors…

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Tips for Increasing Your Savings

Just as it’s important to know the revenues and expenses of your business, the same is true of your personal financial picture. You should know how much you’re earning each month, and what your expenses are. Prioritize your expenses into high, medium, and low buckets, and consider eliminating some of the least important expenses if…

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Overview of Retirement Vehicles

Freelancers can often make larger contributions to their retirement savings than employees can. The amounts you can contribute can change each year – for 2021 there is a $6,000 maximum for a traditional IRA ($7,000 if you’re over 50), and $19,500 for a 401(k) but limits are over $50,000 for SEP IRAs and Solo 401(k)s.…

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Paying Taxes Quarterly

Self-employed workers typically owe taxes quarterly if their tax bill is going to be more than $1,000 for the year, and there are penalties for underpayment. To avoid penalties, you have to pay at least 90% of your taxes owed for the current year or 100% of the tax owed on last year’s tax return…

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Sample Schedule C Deductions

As a self-employed person, one of the biggest benefits is that you get to deduct a wide variety of work-related expenses from your taxes. This is a luxury usually only afforded to wealthy business owners. It is a huge source of savings that you absolutely need to be taking advantage of (and that’s why it’s…

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Tax Deduction Checklist

Here are some standard things you can deduct from your income taxes, in addition to your itemized/standard deduction:  The employer-equivalent portion of your self-employed taxes  Healthcare premiums and some expenses can be deducted (premiums are deducted in Schedule 1, more in the health insurance section).  Retirement savings made to a qualified plan (taken in Schedule…

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Deducting Business Expenses

While there are many names for your chosen career – freelancer, independent contractor, gig economy employee, among others – it effectively means that you work for yourself, that you are running your own business! Like any company, you are allowed to deduct the expenses associated with running your business for tax purposes. This is a…

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Options for Deducting Automobile Expenses

There are two ways to handle deductions for automobiles. Generally, you have to keep track of all your expenses and deduct the total when you file your taxes. For automobiles this would include gas, repairs, car registration, lease payments, depreciation, among others. However, for vehicles there is a standard IRS mileage deduction that you can…

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Expenses on Form 1099

Some of the obvious deductible expenses may be on your 1099 form itself. For example, Uber provides a tax summary with your 1099 income, which includes expenses like Uber’s booking fees, tolls, other booking fees, and split fare fees. All of these can be deducted as expenses on Schedule C of your taxes. However, there…

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Tracking and Reporting Business Revenue

Many people talk about tax deductions (expenses), but it’s also important for you to track your revenues as well. While your customers will likely report your earnings to the IRS, there are quirks in the way those forms work which means they may not capture all of the income or they may double count it.…

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Self Employment Tax

For a W-2 salaried employee, the employer and the employee split taxes for social security and medicare, with each paying 7.65% of the total salary, or 15.3% total (the employer typically withholds this amount from your paycheck and sends it to the government for you). If you are self-employed, you must pay a self-employment tax…

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Self-Employment Tax Example

Let’s say that you had $100k of self-employment income on your Schedule C. When figuring out the self-employment tax that you owe on your Form SE, you get to reduce the self-employment income by half of the self-employment tax rate. So in our example, that means [$100k – ($100k x 15.3% / 2) = $92,350].…

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Free Tax Filings for Incomes Under $73K

The IRS had an agreement with the major tax software companies which required those companies to help the government develop a free tax software for people with incomes below $73k. If you qualify, you can use the link here to begin. There is also a community program called the Volunteer Income Tax Assistance (VITA) that helps…

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Tax Deduction for Living Overseas

The federal government has a deduction available for people who work overseas called the Foreign Earned Income Exclusion. To qualify you must (i) work full time inside a foreign country for a full calendar year (called the bona fide residence test), or (ii) work outside of the USA for 330 days out of any 365…

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Itemizing Deductions vs. The Standard Deduction

Taxpayers have two options for their personal income tax deductions on form 1040, the standard deduction or itemized deductions. You can’t do both, you have to choose one or the other.  Generally, if you don’t have a lot of deductible expenses then you’re likely better off taking the standard deduction. For 2021, the standard deduction…

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2021 Child Tax Credits

The 2021 child tax credits that the government is sending out as part of the Covid-19 stimulus package is based on your 2020 earnings. If you are expecting higher income in 2021 than you had in 2020, this could cause you to have to repay these funds when you file your taxes.  For 2021, the…

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R&D Tax Credits

The government offers R&D tax credits that offset federal income taxes, and in certain circumstances, payroll taxes. A lot of states offer similar credits, so check with your specific state or your local accountant as well. The program is outlined in IRC Section 41 where it is officially called “Credit for Increasing Research Activity.” However,…

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Business Losses on Personal Taxes

What happens if you just started your business and your expenses are greater than your losses? In that case, you’ll have a business loss to report. Note that this only applies for a pass-through tax vehicle – i.e. a sole proprietorship, your own LLC, your own S-Corp (it’s more complicated for an S-Corp, which we’ll…

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Tax Deduction Example for Ride Sharing

Outside of the vehicle (see the section on deducting expenses associated with cars), there are other expenses that you can deduct as well. Since you use your phone for work, you can deduct a portion of your cell phone bill. However, you can only deduct the percentage of the time that you’re using it for…

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Overview of Depreciation

Expenses typically fall into two categories: those that are deductible right away – for example, a dinner with a client – and those that have to be deducted over a longer period of time. An example of the latter expense is depreciation. Depreciation is used for many larger purchases like cars or a renovation on…

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Section 179 Deductions

Section 179 allows you to deduct certain types of property as an expense instead of depreciating it, if it’s purchased for use in your business. These deductions are capped at $1 million in a year. Additionally, your 179 deductions can not exceed your income for that year. However, if this limits you, you can roll…

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199A Tax Break or Qualified Business Income Deductions

As part of the 2017 tax overhaul, there is a new 20% deduction on Qualified Business Income (“QBI”) available to self-employed workers with pass-through taxation (LLC, S-corp, sole proprietorships; basically anything that’s not a C-corp) in the following income brackets: Single Filers – Threshold is $164,900, with a phase-down from there to $214,900 Married Filing…

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Health Insurance Tax Deduction

Most self employed workers can deduct premiums paid for health insurance, dental, and certain long-term care insurance. This is typically a large deduction, so you should make sure you qualify. To benefit from this deduction, you must not be eligible for an employer sponsored plan, either from your employer or your spouse’s. If you meet…

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CARES Act Self-Employment Deferral for 2020

Section 2302 of the The Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Act made changes that allowed self-employed people to defer 50% of the social security tax on their net earnings from March 27, 2020 to December 31, 2020. They refer to this as the “payroll tax deferral period”. 12.4% of your taxes go…

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ACA Markets for Buying Health Insurance

Self-insured employees are responsible for their own healthcare. As part of the Affordable Care Act (“ACA”), there are now Health Insurance Marketplaces which you can access to shop for insurance. More information can be found here.  Most ACA plans come in four categories: platinum, gold, silver, and bronze. These are designed to cover 90%, 80%,…

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Alternatives to ACA Plans

There are some private companies that offer benefits to individuals who do not have employer-sponsored plans available to them. If you know you’re healthy and don’t want traditional insurance (although, this can be risky as you never know what can come your way) these could be viable alternatives to an ACA plan. Many of these…

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ACA Tax Credits

The ACA provided tax credits for self-employed people. Tax credits are available to anyone making 100% to 400% of the Federal Poverty Level (“FPL”), if you don’t have access to Medicaid or employer sponsored coverage (more info can be found here). For 2020, the upper limit for coverage eligibility is an annual income of $49,960…

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Special ACA Subsidies for 2021 and 2022

As part of a Covid-19 stimulus bill passed in March 2021, there are additional subsidies for 2021 and 2022. For 2021 and 2022 the law got rid of the income limit on premium assistance, meaning some people with incomes as high as $149,000 can benefit. Because of the enhanced subsidies, people with non-ACA compliant plans…

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Healthcare Deduction from Taxes

Most self employed workers can deduct premiums paid for health insurance, dental, and certain long-term care insurance. This is typically a large deduction, so you should make sure you qualify. To benefit from this deduction, you must not be eligible for an employer sponsored plan, either from your employer or your spouse’s. If you meet…

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High Deductible Health Plans (HDHPs)

In recent years, as individuals have become more responsible for their healthcare, there has been an increase in high deductible health plans (“HDHPs”) offered by insurers. A deductible is the amount of healthcare spending that the individual is responsible for paying themselves before the health insurance kicks in and starts covering payments. Generally, an HDHP…

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Health Savings Accounts (HSAs)

A health savings account (“HSA”) is a tax-deductible savings plan that you can contribute money to for healthcare expenses. This is similar to how a retirement saving plan works – the money that you put into the account is deducted from your income for tax purposes, thus enabling you to save money in a tax…

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Business Insurance

Business insurance offers protection against significant risks to the business. There are different types of policies to cover different types of risk. The business (also called the “policyholder” or the “insured” in this context) pays a fee called a premium to the insurer to maintain the policy. The premium is often charged monthly or annually.…

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Overview of Contracts

In the U.S., a contract is generally defined as an agreement (or a promise) between two or more parties that creates enforceable obligations.  Contracts can be written or verbal, but in order to be enforceable, they generally must include three elements: an offer made by one party;  acceptance of that offer by another party; and …

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Drafting the Contract

There are a few types of contracts frequently used by freelancers and small business owners: Non-disclosure Agreement (“NDA,” sometimes also called “Confidentiality Agreement”) – used to protect confidential information shared by one or both parties. An NDA can be unilateral, meaning that one party promises to keep the other party’s information confidential, or bilateral, meaning…

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Breach of Contract

If one party fails to act according to a contract (by refusing to pay the other party, for example), that party is in “breach” of the contract. In many cases, the other party can sue the breaching party either for money or to force them to act according to the contract. However, filing a lawsuit…

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Starting a Business

What does it mean to “start a business?” Starting a business is different from forming a business entity. In the U.S., starting a business can be as simple as marketing or selling products or services. Forming a business entity, on the other hand, refers to registering a legal entity used to conduct business–a company–with the…

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Sole Proprietorship

A sole proprietorship is a single individual or couple doing business alone. How It’s Formed: If there is just one owner of the business, a sole proprietorship is automatically created when they start doing business. The owner doesn’t need to file or register anything to set up a sole proprietorship. How It’s Taxed: Sole proprietors…

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General Partnership

A general partnership is a relationship between two or more people to do business together. Each person contributes money, property, labor, or skill, and shares in the profits and losses of the business. How it’s Formed: A partnership is automatically created when one or more people/companies start conducting business. A contract can be used, but…

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Limited Partnership (LP)

A limited partnership (“LP”) is one or more general partners and one or more limited partners. The general partners manage the business and share in profits and losses. The limited partners share in the profits, but losses are limited to their investment in the partnership. Limited partners are usually not involved in the day to…

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Limited Liability Partnership (LLP)

A limited liability partnership (“LLP”) is similar to a general partnership, but each partner’s liability is limited to the amount they each contribute to the business. Usually LLPs are used by legal and financial professionals–law firms, accountants, etc. How it’s Formed: The partners form the partnership by filing a certificate with the state’s corporate filing…

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Limited Liability Company (LLC)

A limited liability company (“LLC”) is a formal business entity made up of members (members can be individual people, corporations, other LLCs, or foreign entities) conducting business. How it’s Formed: The business owners form the LLC by filing an organization document with the state’s corporate filing office, usually the Secretary of State. Some states call…

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Corporation

A corporation is a legal entity that is distinct from its owners. How it’s Formed: The business owners form the corporation by filing a certificate of incorporation (also called a “charter”) with the state’s corporate filing office, usually the Secretary of State.  How it’s Taxed: C-corporations are taxed at the entity level when income is…

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Naming your Business

Business owners should make sure the name they want to use for the business is available before doing business under that name. This is different from registering the business name as a trademark. Registering the business name as a trademark does not entitle the owner to use the name for the business. Business owners can…

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Registering your Business

Once you have decided on which business entity to form, you will need to file business formation documents with the appropriate state or territory office. Many business owners choose to file their business formation documents in states like Delaware, Wyoming, or New York because these states have well-settled and favorable business laws that make it…

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Maintaining Your Business

Once all of the documents have been filed and the business is properly registered, it is important to set up the internal corporate structure that will keep the business separate from your personal assets, activities, and interests. If the business entity is determined to be an “alter ego” of the individual business owner, meaning that…

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Hiring Workers

Your business is growing fast and you have more work than you can handle. It’s a good problem to have, but you need some help. When is the right time to hire help and how should you do it? For many business owners in the U.S., there are two main options: Subcontract / work with…

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Classifying Workers

In the U.S., both state and federal governments regulate employment and independent contractor relationships. Independent contractors and employees are treated differently under the law, and this can have a big impact on your business, as it often costs more and takes more time and resources to manage employees than it does to manage independent contractors.…

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Contracting for Work

Whether engaging an independent contractor or hiring an employee, it is important to have a contract between the parties that includes the key details of the working relationship.  Assuming there are no specific requirements for their contracts, in the U.S., an independent contractor agreement (sometimes called a “Consulting Agreement,” a “Services Agreement” or another title…

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Complying with Employment Laws

Employers are required to comply with all applicable employment laws and regulations. This includes verifying eligibility of employment, paying at least minimum wage, withholding taxes and filing taxes with the appropriate state and federal agencies, providing health benefits when employing a number of employees over a certain threshold, developing workplace policies, and complying with wage…

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