Key Things to Know About the Freelancer vs. Employee Taxation
The freedom to select clients and working hours are some of the perks of becoming a freelancer. Therefore, if you are considering making this move into the freelance industry, you need to get insights on the taxation. The reason is that freelancers taxing works different from that of employees. You require to find online platforms that will assist you to know how the taxes work for self-employed people. The goal is to ensure that you adhere to the taxation laws set by the IRS for self-employed people. Continue reading this blog now to see the key things to know about the freelancer vs. employee taxation.
For the employees, the employers are responsible for handling their income taxes. Therefore, the paycheck you receive as an employee has various deductions already made. When you receive your paystub as an employee, it will show the various deductions that the employer has made. The taxes you pay when you are employed will be determined by how much money you earn and the State you work. It is also wise you learn more about things that can help you pay fewer taxes. It is, therefore, wise you find a genuine website that will assist you to know the various tax forms to use when you are an employee. The other thing is to check the state and local taxes that you are required to pay depending on where you live.
When you are a freelancer, you need to understand that you are responsible for handling all matters relating to taxation. Know that payments from the clients have zero mandatory and voluntary deductions. You need to ensure you keep accurate records on the money you receive from clients for a given duration to use the amount to determine the taxes you will pay- You may have a difficult time calculating the taxes when you are new in the freelancing industry. It is wise you look for resources that will guide you on how to handle this task. You may need to hire an accountant to help you calculate the taxes when you are a freelancer. You also need to weigh the alternative of getting a simple to use taxation software to use when you are new in the freelancing industry. You should therefore compare these two options to determine the one to use. You also need to get more information on tax write-offs you can get when you are a freelancer.
Therefore, if you are considering venturing into the freelancing field, you should keep track of all the money you get from clients. Consider using spreadsheets to input your income after every work, record the money you earn and the expenses you incur.