There are many people who work from home in various of freelance jobs. One of the things a freelancer must learn regardless to his profession is to know how to calculate and file his taxes. For that purpose i found a very nice infographic that can explain this issue.
Let’s go through the infographic’s main points:
Freelancers are subject to the self-employment tax if their earning are bigger than $400 each month. While in 2010 the tax rate was 15.3%, in 2011 its 13.3% after the tax Relief Act. Any income greater than the first $106,800 isn’t subject to social security tax.
Freelancers can choose if to pay their taxes every month or every 3 months (quarterly). There is also a possibility to pay all taxes at once in the end of the year, however, its risky and can cause fines due to errors. Go through the infographic to find which forms you need and more tips about filing.
Tax Deductions For Freelancers
- Unpaid Invoices- If a client disappeared without paying, you can write it off as a bad debt.
- Research- Conferences, books and other research materials are deductible.
- Coffee Meetings- Half of a coffee break bill can be deductible.
- Job Hunting- Membership fee to a freelance website, job board or anything similar is deductible.
- PayPal Fees- You can write off additional transaction fees such as in PayPal.
- Hiring- If you hire another freelancer, the expense can be deductive.
- Home Expenses- You can write off utilities, insurance, mortgage interest, electricity and internet bills when you work at home.
- Phone- The second phone line or cellular phone are deductible.
- Professional Advice- You can write off advices from professionals like lawyer or accountant.
- Self-Employment Tax- Half of the self-employment tax can be deducted on the income tax.
- Healthcare- Health insurance premiums or medical expenses are deductible.
- Credit Card Interest- Any credit card interest is deductible.
Here is the infographic with full details: