January is Never Too Early for Freelance Tax Preparation!

It’s January of 2008 and that means a few things!  I’m still writing the wrong year on my personal checks, every writer should have a great set of New Year’s Resolutions for themselves, and it’s time to start thinking about taxes again.

I did my self-employment taxes for the first time last year and it was a bear.  Not to mention how shocked I was to find out how much moolah I still owed the IRS after all of those deductions I made.  This year is probably going to be worse, I’ve got some carry over from last year’s bill, depreciation to appreciate and a pile of saved receipts to start going through. 

If you have made more than $600 in your business or as a freelancer you’ll need to report that income as self-employment on your taxes this year.  January is the time to start worrying about it too.  Here are a couple of things you can start doing to prepare for doing your taxes or having someone else do it!

1. Start looking for those deductions.  You may have a shoebox filled with old receipts or a habit of stuffing your receipts into your wallet.  Either way it’s time to dump them out and start separating the fast food orders from potential tax deductions.  Anything you paid for as a part of your business or freelance work is pretty much a deduction.  Did you send out short stories or poems?  Deduct the postage.  Have you signed up for special classes or a paid organization?  Deduct the costs.  You’ll want to check out the IRS website for more information on what qualifies as a deduction.
2. Find out just how much you’ve earned gross and adjusted in 2007.  Hopefully you were writing this down somewhere, like a notebook.  If you had been paid through Paypal or even directly to your checking account you can download the information and organize it in excel or one of those popular money accounting programs.
3. Start picking up the IRS forms.  So you aren’t running around at the last minute to find this form or that form, start picking them up now.  You may be able to find all the forms and schedules you’ll need at the library or post office.  You can also go to the IRS website and order the forms you need through the mail for free.

A good head start in preparing for your freelance income tax will work wonders in helping you stay on track and keep your stress level down.