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Reduce Your Freelance Tax Bill with These Top Year-End Deductions

Between the increase in expenses due to inflation and potential end-of-the-year deductions you can take, there is a lot to consider as you work to finalize your freelance business finances before Dec. 31. For this tax season, however, it is important to consider how inflation may play into your calculus, especially when it comes to deductions or if you raised prices to keep up with inflation. Many of the changes that were introduced in the Inflation Reduction Act will not go into effect until January 1, 2023, but there are still deductions you can take advantage of now that can

Is Your Freelance Side Hustle a Hobby or a Business? Use This Checklist to Determine Your Tax Obligations

As the end of the year approaches, it’s key to make sure that you are keeping your records up to date in regard to all income and taxable revenue you are generating from any source. This includes hobby businesses. Many freelancers have multiple streams of revenue, some of which may involve a special hobby that they try to monetize. If this applies to you, it is important to determine if your hobby is actually a business because the IRS will require you to pay taxes on the income derived from it. If you do not meet the qualifications for a

It’s the Final Countdown for Extended Freelance Tax Returns Don’t Miss It the October 17 Deadline!

Did you run short of time last April when the regular tax filing deadline came? Hopefully, it was a rare occurrence and you took the smart step of filing an extension for your 2021 taxes. If so, the six-month window to get your taxes filed without additional failure to file and late payment penalties is rapidly closing. It will slam shut on October 17, 2022, so if you haven’t already, now is the time to make good on your commitment to filing by this date. Doing so will take it off your to-do list and reduce your tax penalty burden

Are You Facing Failure-to-File Penalties for Your Freelance Taxes? The IRS Just Announced Relief for 2019 and 2020 Penalties

The IRS just announced that it will automatically provide relief from failure-to-file penalties including a broad range of tax and information returns for 2019 and 2020 tax years. This could be good news if you did not file your taxes for these years. If you have already paid the penalties, the IRS will also automatically issue you a credit. Here are some answers to some common questions about the new IRS failure-to-file penalties: Which tax and information returns does the penalty abatement apply to? The penalty abatement applies not only to your federal individual and business taxes (Forms 1040, 1041,

The New Student Debt Relief and Your Taxes: What Freelancers Need to Know

There has been lots of talk about student loan forgiveness recently, especially after the past two years of Covid chaos which had a negative financial impact on many taxpayers. Now with inflation rising, the government has finally pushed through the American Rescue Plan legislation including student loan debt relief which may help your financial situation as a freelancer. A key caveat: The net benefit of this new legislation may largely depend on where you live, according to how each state enacts it. Here are the details of how the American Rescue Plan may help individual taxpayers: If you are an

Four Key Tax Changes for Freelancers in the New Inflation Reduction Act

The Inflation Reduction Act (IRA) was passed by the U.S. senate and signed into law this month. When this happens, there will be some notable tax changes. Here is a summary of the ones with the most significance for freelance business owners: 1. Enhanced IRS enforcement could increase your risk of an audit. The IRA has big time funding for the IRS to the tune of a $3.1 billion to increase for IRS taxpayer services, $45.7 billion for IRS enforcement, $25 billion for IRS operations support and $4.7 billion for IRS technology upgrades. This means the IRS is going to

Traveling for Your Freelance Business? Don’t Let Tax Deduction Details Trip You Up

Business travel expenses can provide a freelancer with significant business expense deductions. However, deductible business expenses are subject to numerous rules which must be carefully followed, or you risk an unpleasant surprise if you are audited. Let’s start with what qualifies as a business travel expense. The rules changed, temporarily, due to Covid and they will revert to the original IRS definition beginning January 1, 2023, for some business expenses. However, pre-Covid and post-Covid, business travel expenses must be ordinary and necessary expenses while traveling for your business, away from your tax home. This applies to you as a freelance

Scaling from Solopreneur to an S-Corp?

If your freelance business is on a significant growth trajectory, congratulations! All of your hard work is paying off, and you may be considering switching your entity type from a sole proprietorship or limited liability company (LLC) to an S-corporation (S-corp) to take advantage of the payroll tax savings and other benefits (you can read about entity selection more fully here). The payroll tax savings related to S-corp entities are a key consideration when deciding whether to form or transition your existing entity to an S-corp. However, if you do so, you need to make sure to calculate whether it is

Worried About the Impact of Inflation on Your Freelance Business? Here’s What You Need to Know to Avoid Higher Tax Bills

With all of the news coverage about inflation, it is hard not to think about where the economy is going and, for those of us who are self-employed, the perceived risks and threats may be amplified. Is this anxiety justified? Read on so you can judge for yourself and take the appropriate action to reduce your tax obligations as much as possible. First, consider the facts about inflation: Inflation is a loss of purchasing power over time. It’s not your imagination: right now a dollar will not go as today, as it may have previously. If you have noticed your

Is Rental Real Estate Part of Your Freelance Income?

Here’s What You Need to Know About Related Losses Many self-employed individuals and freelancers invest in rental real estate properties to supplement their income or even get their real estate license to do the same. If you’re one of them, it’s important to understand how potential losses may impact your taxes. Understanding how the IRS treats rental property income and losses is key. First a definition. The Internal Revenue Service (IRS) defines a rental property as “any transfer of property for compensation.” This could include transactions such as those involving Airbnb, Vrbo, single family homes, townhomes, condominiums, and apartments, to

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