Key Things to Know About the Freelancer vs. Employee Taxation
Being a freelancer gives you the control to decide when to work and the clients to choose. It is necessary you get more information on how taxes work for the freelancers when thinking about becoming one. You need to know that taxation works differently between the freelancers and the employed people. Hence, you need to look for a genuine website that will guide you know the taxation guidelines for freelancers. The target is to avoid problems with the IRS. 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. You will therefore receive a salary that is less various deductions made by the employer. When you receive your paystub as an employee, it will show the various deductions that the employer has made. Your income bracket and where you live will impact on the taxation rate. It is also wise you learn more about things that can help you pay fewer taxes. It is smart you view this website that will guide you to know the taxation forms to use when you are employed. The other thing is to check the state and local taxes that you are required to pay depending on where you live.
If you decide to become a freelancer, you need to know that you will be managing all things relating to the taxes you pay. 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. 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 smart you examine these two alternatives, see the cost of each to identify the one to employ. You can deduct certain expenses from your income as a freelancer reducing the amount you pay in taxes.
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.