4 End of Year Tax Tips for Freelancers

We’re just over 9 weeks away from the new year. And while there are many enjoyable holiday traditions to look forward to, there are also some not so fun ones—like end of the year taxes. We know what you’re thinking…But taxes aren’t due until April 15th! And while you’d be right in thinking it, you’d be sorely misguided if you didn’t consider the end of the year as an important time for taxes.

Image from FlexJobs.com.

We’re just over 9 weeks away from the new year. And while there are many enjoyable holiday traditions to look forward to, there are also some not so fun ones—like end of the year taxes.

We know what you’re thinking…But taxes aren’t due until April 15th! And while you’d be right in thinking it, you’d be sorely misguided if you didn’t consider the end of the year as an important time for taxes. Dec. 31st is the deadline for most tax breaks and it’s a crucial time to increase deductions so you can decrease your taxes. If you wait until the new year, it will already be too late to capitalize on big deductions!

Here are 4 end of the year tax tips to help freelancers start off 2016 with a bang:

Invest in Your Skill Set Before the End of the Year
Want to improve your business skills? Need a programmer but can’t afford one? Now’s the time to go to that web developer boot camp or that small business conference in Vegas. These business related courses will be tax deductible so long as you do them before 2016. Not only will you be turning yourself into an entrepreneurial ninja, you’ll be saving money while doing it.

Invest in Your Business
Now that you know the benefits of investing in yourself, it’s time to consider investing in your business. In the next few weeks, consider boosting your marketing presence and increasing your ad space. These things will allow you to increase deductions while growing your business.

Invest in Assets
Investing in assets is a great way to increase productivity while (yup, you guessed it) decreasing taxes. By making smart investments you can turn those assets into a profitable ROI. Assets might include things like new computers, office furniture, and equipment. And so long as your business is profitable—you can write off 100% of those assets.

Side Note: As the law stands, assets can be deducted up to $25,000. Be aware however, that last year Congress waited until Dec. 14th to pass Section 179 of the Federal Tax Code. Section 179 retroactively changed the amounts of deductible assets to $500,000. It’s entirely possible that the process repeats itself this December.

Pay Your Quarterly Estimated Taxes
Paying your quarterly estimated taxes might seem straightforward, but with the April 15th being the seminal date for taxes—business owners often forget about keeping up with their quarterly estimated taxes.

The final day to pay estimated taxes is January 1st, so make sure you pay them on time to avoid penalties. Most freelancers are cash basis taxpayers which simply means they report income and deductions in the same year that they receive them. If possible, you should try and get your clients to pay out in January. By being paid in January rather than December, you won’t have to declare that income on your taxes for another year.

Austin Miller is the Content Marketing Ninja at Bookly, an online bookkeeping service designed for small business owners. Bookly pairs you with a dedicated bookkeeper and software so you spend more time doing what you love.

7 Documents Every Independent Contractor Should Keep

Freelancers and contractors are projected to make up more than 40 percent of the US workforce by the year 2020, likely leading to more scrutinized employment laws. Protect yourself by keeping important documents securely stored and easily accessible.

Keeping track of business documents seems like an obvious obligation for an independent contractor, but the “what”, “why” and “when” of this obligation remains a gray area for many. With Uber’s recent legal challenges concerning the worker classification of independent contractors, documented proof is only sure-fire way to defend against fees and legal claims from the IRS.

But do you know exactly what to keep, and how long to should keep it for? Leaving a paper trail to prove independent contracting work is more important now than ever before, and Shoeboxed wants to make sure you understand the benefits of keeping the following documents safe, secure and accessible:

Invoices (7 years)
Key business ledgers like invoices should be kept for a minimum of seven years, and for good reason. It’s the best way to protect your contracted accounts against a conflict with a client project. Invoice statements also verify that you are subject to profits and losses, which is one of the factors in the Twenty Factor Test for an independent contractor. In the event of an IRS audit, this will help prove your status as a contractor.

Travel Mileage Logs (3 years)
Like any good expense reporting habit, keeping travel mileage logs ensures protection against tax audits and business disputes. They can also be used for travel deductions, earning you up to 57.5 cents for every mile you claim. There are plenty of travel miles that qualify, including business travel to and from airports and hotels, errands and supply runs, travel to client offices, and to and from business meals. Don’t miss out on those valuable deductions!

Business Cards (Forever)
Being a successful contractor requires agile networking skills. At any given moment, there’s a chance that you will stumble across your next great project, partner or client. Unfortunately, contractors collect dozens of business cards every month that are habitually trashed or misplaced. Keeping business cards can help secure resourceful relationships; you never know when one of those contacts will come in handy. Working for multiple clients is also part the IRS’s Twenty Factor Test, and business cards may provide evidence that you are not controlled by a single employer.

Service Advertisements and Listings (Forever)
Keeping copies of past service advertisements and listings is yet another easy way to formally and legally prove a contractor-client relationship. The IRS says that making services available to the general public on a regular and consistent basis demonstrates autonomy in the nature of the work. It also confirms your intent of work in the event that a client wants to claim you as an employee rather than a contractor.

Project Records (7 years)
Contractors are required to fill out form 1099-MISC, a detailed document that asks what you made for each individual job. Project documents, including the contract, change orders, correspondence, logs, monthly reports and schedules provide the specifications and technicalities needed not only to fill out a 1099, but they also provide detailed insight of your contract work to the IRS if your worker classification ever comes into question.

Tax Returns  (3 years)
Due to the IRS statute of limitations, three years from the date of your tax return (or from the date of filing, whichever is later) is typically the standard time to keep business tax returns for tax-related business documents. The statute states that you have three years to file a claim for a refund, and the IRS has three years to appraise a tax if your income was not accurately reported. Even if these two situations don’t apply to you, keeping recent tax records protects you from any doubts that may be raised against your tax filings in the future. (Source)

Professional Licenses and Insurance Certificates (Forever, or until expiration)
Many jobs require contractors to be professionally certified in a given field of work in order to complete a client project. Though the regulations vary state-by-state and city-by-city, having these documents on hand and ready to present to a potential employer streamlines the hiring process, increases the probability of getting hired for the job, and may even increase your potential pay. Clients want to know they are legally protected and are hiring the right person for the job — it pays off to gain their trust from the get-go. (Source)

Lastly
Freelancers and contractors are projected to make up more than 40 percent of the US workforce by the year 2020. Make sure you’re protected against new contract work laws and save your documents for secure and easy access. Shoeboxed offers mail-in services with premium plans, allowing contractors to send in their important documents and never have to worry about being able to find and provide legal supporting documents for their contract work. Focus on working for yourself and doing what you love — we’ll handle the paperwork.





7 Tips to Get Paid Faster

Every freelancer wants to get paid faster, or even paid on time. Here are the top seven payment excuses freelancers hear most often and how to handle them.

This guest post is brought to you by WePay – the easiest way to accept credit cards online.

So many clients, so many excuses. We’ve all had that client who is extremely open and willing to talk… until the subject of money comes up. Suddenly they’re a ghost and nowhere to be seen. When you do get in contact with them, they have endless excuses to throw at you.

Every freelancer has at least one story like this. Don’t you wish there was a way to make the process easier and more streamlined? Check out the following common excuses we’ve heard and see how to combat them so that you can get paid faster.

1. I was confused.

The last thing you want to hear when you complete a job is “Huh? This isn’t what I wanted,” or “So what happens now?” Confusion is a common excuse for clients that basically indicates they aren’t ready to pay you yet. The trick here is to be very specific with the job description. Go over every single little detail with them, including when they will pay and how, so there’s no confusion when the invoice is due.

2. Where and how do I pay?

Speaking of payments, don’t give clients any chance to wonder how to pay you. Some prefer checks. Others prefer credit cards. Still others prefer a simple solution like paying by credit card online with WePay. If you just offer one way to pay, though, some clients will use this as an excuse – warranted or otherwise – to delay your payment. Offer numerous payment methods, and it’s likely that you’ll get paid faster.

3. I couldn’t contact you!

Another common issue clients have is getting in contact with you. Like payment options, you want as many ways to contact you as possible. Don’t just rely on email; create invoices that include your phone number, physical address and other means of contacting you.

4. I never got an invoice.

Want them to be punctual? Then you should be, too. Lead by example and don’t turn anything in late, including your invoice. Even though you were super specific when they should pay, some people won’t pay until they see an invoice. And if you’re very late sending out the invoice, they may have forgotten about the great job you did, creating a further delay.

5. I didn’t hear from you, so…

Sometimes you get the feeling in the pit of your stomach that a client is going to be a problem. Unfortunately we don’t always follow up on this feeling and let things go. However, you shouldn’t be afraid to follow up with a client. Email them to ask if the work was ok or if they have any questions – anything to keep you in their mind.

6. I didn’t think this job was that serious?

This is one of the most infuriating excuses you can hear, as it practically invalidates your entire career. Generally what they mean, though, is they don’t feel “invested” in the relationship. Combat this with a deposit. Suddenly instead of hiring some random person for a new banner for their website they’re hiring a professional who requires money to initiate the business transaction.

7. Eh, there’s no contract, so what are you going to do, sue me?

Obviously the solution is in the excuse here. Many freelancers and small business owners don’t like to mess with contracts as they see them as annoying or as a possible bane to clients. However, they prevent problems, including non-payment by fussy clients. Just make sure every little detail you agree to with the client is in the contract.

Do you have a slow or non-paying client story? How did you collect your money? Tell us your tips to get paid faster in the comments!