If you're a freelance blogger and get paid as an independent contractor, then it's highly likely that taxes are not being taken out of your pay. The IRS wants its share of your pay, regardless of your status as a full-time employee or a freelancer. Depending on how much money you make as a freelancer during the year, you could be hit with a surprisingly painful tax bill when you file your annual tax return unless you plan ahead. First, you need to understand how freelance blogger taxes work, and then use the tips below to prepare yourself for tax season.
Take All Possible Deductions
Consult with a tax professional to make sure you're taking all the deductions you legally can. To get started, check out this list of tax deductions for bloggers.
Keep Accurate Records
Save all of your business-related expense receipts, paychecks, electronic paystubs, and so on. Not only will you need them when you or your tax preparer completes your tax return, but you may need to present them in case your return is audited.
Classify Your Freelance Blogging Business
Depending on your personal situation, you might want your freelance blogging business to be classified on your tax return as a sole proprietorship, an s-corp (small corporation) or a limited liability corporation (llc). Read more about classifying your blogging business, and then consult with a tax professional for additional guidance.
Pay Taxes out of Other Income Each Month
If you make a sizeable income from your freelance blogging business, you could find yourself with a large tax liability when tax season rolls around. To be sure you aren't underpaying taxes throughout the year, increase your withholdings from any taxed income that you receive each month such as your paycheck from your full-time job if you have one or your spouse's paycheck.
Save a Percentage of Your Freelance Blogging Income Each Month for Taxes
Another way to reduce the tax bill on your freelance blogging income when you file your tax return is to put aside a percentage of your income each month specifically for the purpose of paying your annual tax liability. This way, you'll have the money you need when you or your tax preparer calculates the tax due on your tax return. Many freelancers find that setting 20% of their monthly income aside is usually enough to cover their tax bills each year. Consult with a tax professional to determine what's the best amount for you to earmark for taxes each month.