As a freelance writer, you may be happy to be able to use your creativity to make money. However, the accounting side of things may be intimidating and you may not know what to do to keep your finances in order. Luckily, there are some simple steps you can take to manage the books. Here are some accounting tips to keep in mind for your freelance business.
Keep Business Finances Separate
It can be easy to forget that freelance writing is a business. To make sure your taxes are handled properly, it is wise that you keep your personal and business finances apart from each other as much as possible. For instance, you may have a bank account that you only use for payments from clients and business expenses, such as paper purchases and computer repairs. That way, it is easier to find deductions and other relevant tax information later.
Keep Neat Files
It is easy to let receipts, invoices and other paperwork pile up, but that only creates more work for you. Make sure you devise a neat filing system, with specific areas for unpaid invoices, writing course bills and equipment repair receipts.
Even if you use the computer to generate invoices and other business documents, it is a wise idea to print them out, so that they are easier to keep track of. If you don't want to print every individual invoice, for instance, print weekly or monthly reports.
Send in Quarterly Tax Payments
As a freelancer, you are solely responsible for all federal, state and local taxes. The federal government requires that you pay your taxes quarterly if you make more than $400 a year through your self-employed freelance work, so you must take it upon yourself to send those payments in if you want to avoid heavy fines when you file your income tax returns.
To determine how much taxes to pay quarterly, it is best to enlist an accountant to help you estimate your tax responsibility. That way, you can avoid mistakes that will end up costing you more money when the IRS has had a chance to examine your income. An accountant can also help you determine what your state and local taxes will be.
Use the information laid out in this article to better manage your finances as a freelance writer. Consult a local accountant who has experience with freelancers; they can help you keep your bookkeeping in order. For more information, contact a local accounting and finance firm, like Waggoner Frutiger & Daub CPA's.