Key Things to Know About the Freelancer vs. Employee Taxation
The flexible working hours and being in charge all some of the things that are motivating many Americans to become freelancers. It is necessary you get more information on how taxes work for the freelancers when thinking about becoming one. Understand that the employees’ taxes are different from the self-employed people. 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. Read more now to see the vital items to learn about the freelancers versus employees taxation.
The employer handles the taxes for all his employees. Therefore, the paycheck you receive as an employee has various deductions already made. The employer will withhold your income tax for the month and make other voluntary deductions. The amount you pay in taxes as an employee will depend on your income and where you work. Some people get tax relief to reduce the taxation burden due to various issues such as having many dependents. 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. It is also necessary you discover more about the local and State taxes.
If you decide to become a freelancer, you need to know that you will be managing all things relating to the taxes you pay. Your clients will not deduct the taxes from the money they pay you for the services you offer to them. To ease calculating the taxes to pay as a freelancer, you need to keep track of all your earning for a given period. 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. Some freelancers opts to hire accountants to help them when calculating the taxes and ensure they pay them on time. Other prefer to invest in an accounting and taxation software, where they input their incomes and the software calculate the taxation. It is, therefore, wise you examine these options to decide the one that will work best for you. The other thing is to learn more about the tax write-offs you are eligible to get as a freelancer.
Handling the taxes as a freelancer does not have to be hard when you keep a good record of your earnings. You may opt to use a spreadsheet to keep track of the money you have earned in the years.