by Jonathan Medows, CPAforfreelancers.com
We’re deep into tax season. If you haven’t already filed, it’s time to get your act together and get organized. Gathering your records, filling in an electronic or paper tax organizer, and pulling together all of your official documents will make tax time much easier for you.
What documents will you need?
Some of the most common records used when preparing tax returns are partnership or corporate returns, income reporting documents such as W-2s and 1099s, and Schedule K-1s, which show income you’ve received from partnerships and trusts.
If you prepare an annual income statement or company balance sheet for your freelance business, pull those out. You’ll also want receipts for any fixed assets you’ve purchased in 2013 that relate to your business. And if you have children in college, make sure you get their tuition statements, called 1098-Ts. They can be used to take tax credits for qualified education expenses.
As a freelancer, you probably made quarterly self-employment tax payments in 2013. If so, make sure you have a record of the amounts you paid and on what dates. Self-employed individuals also often pay for their own health insurance or have student loan interest, both of which may be deductible.
The IRS has a handy checklist on its website, http://www.irs.com/articles/tax-preparation-checklist, which may remind you of things you wouldn’t immediately think of, such as property loss, mortgage interest, and charitable contribution records.
Tips to Always Stay on Top of Your Taxes
*Do some number-crunching ahead of time. *Whether you do your own taxes (not a good use of time for most freelancers, especially those who bill by the hour) or have an appointment set up with your CPA or tax-preparer, it’s wise to do some number-crunching ahead of time. Turning over a shoebox full of receipts and paying a professional to sort through them and add them up is going to cost a fortune and be a poor use of everyone’s time.
*Take advantage of technology. *If you’re not already using a software package to track your income and expenses on a weekly or at least a monthly basis, it won’t help you for the 2013 tax year. But make a plan right now to get some kind of electronic system in place for 2014. Investigate some of the free and low-cost options that can be downloaded from places like GnuCash, http://www.gnucash.org.
*Make time for record-keeping. *Devote a few minutes at regular intervals to keep your records up to date. It’ll save a load of time next year at tax time, and put you ahead of the game in terms of organization. Maybe you’ll even be one of those early birds in 2014.
Jonathan Medows is a New York City based CPA who specializes in taxes and business issues for freelancers across the country. He has a resource section with how-to articles specifically for the self-employed at his website, www.cpaforfreelancers.com.