For freelancers, June is tax time, and so is October, January, and April. Back when I was an employee, I only worried about taxes in the first quarter of the year. Now that I am self-employed, it’s a once per quarter activity, and while I’m my own CEO, my finances are not a solo operation. It takes a village to ensure my business is on point. Here are a few starter tips to ensure your accounting and tax preparation are solid:
Hire professionals. Research and hire a certified public accountant to provide tax forecasting and do your actual taxes. This includes estimates for quarterly tax payments. Your network or professional communities like Progressive Communicators of DC should be able to provide recommendations.
Continue your retirement savings. Did you roll your 401K over into an IRA? Use your IRA managers to also set up a Simplified Employee Pension (SEP) IRA, where you can contribute a percentage of your income (before taxes). One tip — you can still contribute for the prior year in the first quarter of the current year. After reviewing your total revenue from the year, your CPA will be able to advise on how much you should contribute to maximize tax savings.
Separate your personal and business banking accounts. Open a business account when you’re first setting up your business, and, if eligible, secure a business credit card as well. This way, it’s easy to track income and expenses and pull reports that you can share with your financial advisers. The credit card is helpful for recurring payments, and you may even get cash back or points. Also, if your financial manager at your bank reaches out for a call, set it up. You never know what additional services or advice they may be able to offer you.
Ask your clients to pay you by ACH transfer. A check is nice, but a direct deposit is even better. The money is immediately in your account. No need to make a deposit at the bank or even through an app. ACH eliminates the need to worry about a daily or monthly mobile deposit limit.
If you have an IRS employer Tax ID, use it on your W9. In addition to the separate banking accounts, this is also a nice way to separate your personal and business affairs, and quite frankly, it makes you feel even more like a boss.