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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

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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

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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

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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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Tax Deductions Are Few for Pro-Bono Freelance Work, Get in the Know

Like many freelancers who are good at what they do, you likely get approached by not-for-profit organizations (or friends who work for them) to provide pro bono services. That is, you do work and provide services without charge. This is a great way to gain exposure in a market as well as create some goodwill, however, it is important to understand that it really has very little benefit to your tax situation. Unlike actual charitable contributions and some expenses related to performing pro bono work, such as mileage driven and supplies used in the performance of the volunteer tasks, any

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Suddenly Self-Employed? Key Tips for Combining W-2 & 1099 Income

Given the focus in May on National Small Business Week, (May 1 to 7) and the end of the tax filing season, if you find yourself transitioning from regular wage-earning employment income (reported on a W-2) to self-employment (tracked by those who pay you on a 1099), or a combination of both income streams, you need to understand how to handle your income tax and other taxes to avoid problems later. If you are not a full-time freelancer, and you have a side job such as consulting, writing, or selling ecommerce or other products, you will have to handle your

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Tax Day isComing! Can’t Make the April 18 Deadline? File an Extension for Freelance Taxes Now to Avoid Fines and Penalties

Missing documents? Mega-busy calendar? If you’re like many freelancers you have more than enough on your plate to keep you busy all day every day, without the added burden of tax preparation. However, the IRS doesn’t take kindly to missed tax filing deadlines, which is why you need to file your taxes by the April 18 deadline, or file an extension now to avoid paying fines and penalties later.    Here’s what to do if you can’t file your freelance return on time:   Make sure you file Form 4868 by April 18, 2022 to get an extension of the

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Crowdfunding for Your Freelance Business? Be Prepared to Report and Pay Tax on the Contributions.

What better way to fund your next big freelance endeavor than through crowdfunding? All it takes is a little effort on your part and you can rake in some cash “gifts” and “goodwill contributions” to help you move your vision forward, right? While this is true from a purely business development perspective, what isn’t true is that the money you bring in is tax-free.  In fact, the IRS views any crowdsourced funds the same as any other business or personal income. As a result, you will be taxed on it. In fact, if you are using a crowdfunding platform such

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Cashing In on Crypto? Getting to Know HIFO! It Can Save You Significant Tax Dollars

If you are holding bitcoin in your virtual currency portfolio, you need to be aware of the HIFO (highest in, first out) tax loophole which could save you significant amounts of cash by reducing your tax burden on cryptocurrency capital gains. Here Is How HIFO Works for Bitcoin and Other Virtual Currency Investments: As you may be aware, when you sell cryptocurrency, you can select the specific unit you are selling. In this scenario, the strategy is to use the value of the most expensive bitcoin you must determine your tax obligation for any capital gains you have. This higher

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Freelance Businesses Claiming the Employer Retention Credit Now Face an Increase in Taxable Income

The Employer Retention Credit (ERC) was first introduced in 2020 as part of the U.S. government’s relief for small businesses who were adversely affected by the pandemic and was also made available in 2021 to employers who kept employees on their payroll during Covid-19. The bad news: if you applied for the ERC in 2020 or 2021 even if you have not received the money yet, you will now face a tax bill payable for funds you either received or may receive. Even if the ERC payments that you applied for is still pending based on your payroll, they are

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