4 Tips for Freelancers to Track Their Income and Taxes

Being a freelancer has its perks, you get the freedom of working from anywhere, choose your workload, and your own work hours. 

This also means that you can have various contracts going at once, and several more throughout the year, which can be overwhelming when tax season arrives.

It is essential to know how to do your own self-employed taxes and bookkeeping, to prevent any issues, such as an audit from happening.

Every single year, the IRS performs approximately one million audits
, and trust us, you do not want that to happen to you. 

So how can you do your bookkeeping, track your income, and your expenses properly so that you do not risk an audit? 

Thankfully, we created this article to help with exactly that. Keep on reading to learn how to organize your self-employed bookkeeping the right way.

Let’s get started.

Keep Your Receipts Organized

The last thing you want to experience at tax season is a giant bundle of all your receipts from the previous year. To prevent this, keep your receipts organized a little bit every day as the year progresses.

You can use gadgets like a receipt scanner or certain apps for organizing receipts, or just have them separated into different zip-lock bags that are labeled with each type of expense. This includes; food, office supplies, transportation, cell phone, internet, personal development, rent, etc. 

Have a Separate Bank Account

A major Self-employed bookkeeping mistake many freelancers make is using the same bank account for their personal and business banking. This will lead to hair-pulling moments while you have to separate every single transaction from the entire year.

Do yourself a favor and get a different bank account. Plus, the bank fees can be written off in your taxes. While you are at it, do yourself a huge favor and get a business credit card too. 

Know Your Expenses

Being self-employed means that you have numerous expenses that could be written off come tax season. This includes:

  ●   Rent or office space
  ●   All office supplies, laptops, etc.
  ●   Professional development, courses, etc.
  ●   Insurance
  ●   Legal Fees
  ●   Advertising Expenses
  ●   Business trips
  ●   Cell phone, internet bills
  ●   Transportation for business meetings
  ●   Meals with clients
  ●   Online software program payments

You will thank yourself later by keeping track of these as you go along. Using a paystub maker can also help you keep a record of payments and expenses. 

Stay Organized

To prevent a tax-season meltdown, you must stay organized during the year. This includes creating a system that helps you to stay organized, such as investing in a dropbox folder.

Programs like Dropbox make organization simple, as you can download any electronic receipt and add it to a monthly folder in your Dropbox account. Plus, you can write off your dropbox fees as an expense. 

Learn More Self-Employed Bookkeeping Tricks

Self-employed bookkeeping does not have to be a painful experience. By staying organized, you can get through your taxes with a breeze.

If you found this article helpful, check out more like this under the business and finances section of our blog.