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5 Tax Tips Freelancers Need to Know

5 Tax Tips Freelancers Need to Know

Being your own boss has a lot of advantages – setting your own hours, working in comfy clothes, and no annoying co-workers (unless you count the cat, who decides to nap on your laptop). There are a few disadvantages too – including dealing with taxes.

Freelancers – whether or not you are officially incorporated – need to be diligent come tax time or else face scrutiny from the IRS. To make sure you don’t over (or under) pay the IRS, here are five tax tips every freelancer needs to know:

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Put money aside.

Freelancing’s dirty little secret is that when it comes to Social Security and Medicare taxes, you get hit double. Not only do you need to pay your portion, you also pay the employer’s portion. Let’s say you did $10,000 of work for Company A during the past year. You not only pay taxes on your earnings like a typical employee, but you also pay the company’s portion, too. One way around this problem is put money aside from every check that comes in to pay your taxes.

Track your spending.

Whether you use an Excel document or a fancy software package, keep a list of any business expenses, whether it’s your phone service, office supplies, lunches out with key contacts, or professional memberships. Along with tallying up that information, keep your receipts just in case the IRS questions whether you really spent $500 on ink for your printer. Utilize an accordion file for all of your receipts, making the different categories with titles like office supplies, cell phone, networking, and professional services.

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Look at your deductions.

If you have a room in your home dedicated to your business, you can use Form 8829 to calculate your home office expenses. Measure the amount of square feet of your work space and subtract from your home’s total size to get a percentage. If you use 5 percent of your home for your business, that means you can consider 5 percent of your home’s expenses, such as utilities, mortgage, rent and more, as a business expense. That’s definitely a win.

Plan ahead.

As mentioned earlier, being self-employed means you get hit twice come April 15. Many freelancers take that tax bill and pay quarterly estimated income taxes to spread out the pain. How much do you need to pay? The Self-Employment Tax is figured out on Form 1040 Schedule SE and is roughly 15.3 percent of your business’ net profit.

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Get some help.

Don’t be afraid to ask an accountant for help when it comes tax time or assistance in setting up a simple retirement plan. An accountant is especially helpful if your business is incorporated. He or she can help guide you through the tax maze. Every cent you pay for their help will be worth it – especially if it saves you money down the road.

Being organized and keeping good records (and receipts) are two key items to remember when doing your taxes. It will not only translate into spending less time searching for documents when it comes time to fill out your 1040, it will help if you ever get audited.

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Last Updated on March 29, 2021

5 Types of Horrible Bosses and How to Beat Them All

5 Types of Horrible Bosses and How to Beat Them All

When I left university I took a job immediately, I had been lucky as I had spent a year earning almost nothing as an intern so I was offered a role. On my first day I found that I had not been allocated a desk, there was no one to greet me so I was left for some hours ignored. I happened to snipe about this to another employee at the coffee machine two things happened. The first was that the person I had complained to was my new manager’s wife, and the second was, in his own words, ‘that he would come down on me like a ton of bricks if I crossed him…’

What a great start to a job! I had moved to a new city, and had been at work for less than a morning when I had my first run in with the first style of bad manager. I didn’t stay long enough to find out what Mr Agressive would do next. Bad managers are a major issue. Research from Approved Index shows that more than four in ten employees (42%) state that they have previously quit a job because of a bad manager.

The Dream Type Of Manager

My best manager was a total opposite. A man who had been the head of the UK tax system and was working his retirement running a company I was a very junior and green employee for. I made a stupid mistake, one which cost a lot of time and money and I felt I was going to be sacked without doubt.

I was nervous, beating myself up about what I had done, what would happen. At the end of the day I was called to his office, he had made me wait and I had spent that day talking to other employees, trying to understand where I had gone wrong. It had been a simple mistyped line of code which sent a massive print job out totally wrong. I learn how I should have done it and I fretted.

My boss asked me to step into his office, he asked me to sit down. “Do you know what you did?” I babbled, yes, I had been stupid, I had not double-checked or asked for advice when I was doing something I had not really understood. It was totally my fault. He paused. “Will you do that again?” Of course I told him I would not, I would always double check, ask for help and not try to be so clever when I was not!

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“Okay…”

That was it. I paused and asked, should I clear my desk. He smiled. “You have learnt a valuable lesson, I can be sure that you will never make a mistake like that again. Why would I want to get rid of an employee who knows that?”

I stayed with that company for many years, the way I was treated was a real object lesson in good management. Sadly, far too many poor managers exist out there.

The Complete Catalogue of Bad Managers

The Bully

My first boss fitted into the classic bully class. This is so often the ‘old school’ management by power style. I encountered this style again in the retail sector where one manager felt the only way to get the best from staff was to bawl and yell.

However, like so many bullies you will often find that this can be someone who either knows no better or is under stress and they are themselves running scared of the situation they have found themselves in.

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The Invisible Boss

This can either present itself as management from afar (usually the golf course or ‘important meetings) or just a boss who is too busy being important to deal with their staff.

It can feel refreshing as you will often have almost total freedom with your manager taking little or no interest in your activities, however you will soon find that you also lack the support that a good manager will provide. Without direction you may feel you are doing well just to find that you are not delivering against expectations you were not told about and suddenly it is all your fault.

The Micro Manager

The frustration of having a manager who feels the need to be involved in everything you do. The polar opposite to the Invisible Boss you will feel that there is no trust in your work as they will want to meddle in everything you do.

Dealing with the micro-manager can be difficult. Often their management style comes from their own insecurity. You can try confronting them, tell them that you can do your job however in many cases this will not succeed and can in fact make things worse.

The Over Promoted Boss

The Over promoted boss categorises someone who has no idea. They have found themselves in a management position through service, family or some corporate mystery. They are people who are not only highly unqualified to be managers they will generally be unable to do even your job.

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You can find yourself persistently frustrated by the situation you are in, however it can seem impossible to get out without handing over your resignation.

The Credit Stealer

The credit stealer is the boss who will never publically acknowledge the work you do. You will put in the extra hours working on a project and you know that, in the ‘big meeting’ it will be your credit stealing boss who will take all of the credit!

Again it is demoralising, you see all of the credit for your labour being stolen and this can often lead to good employees looking for new careers.

3 Essential Ways to Work (Cope) with Bad Managers

Whatever type of bad boss you have there are certain things that you can do to ensure that you get the recognition and protection you require to not only remain sane but to also build your career.

1. Keep evidence

Whether it is incidents with the bully or examples of projects you have completed with the credit stealer you will always be well served to keep notes and supporting evidence for projects you are working on.

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Buy your own notebook and ensure that you are always making notes, it becomes a habit and a very useful one as you have a constant reminder as well as somewhere to explore ideas.

Importantly, if you do have to go to HR or stand-up for yourself you will have clear records! Also, don’t always trust that corporate servers or emails will always be available or not tampered with. Keep your own content.

2. Hold regular meetings

Ensure that you make time for regular meetings with your boss. This is especially useful for the over-promoted or the invisible boss to allow you to ‘manage upwards’. Take charge where you can to set your objectives and use these meetings to set clear objectives and document the status of your work.

3. Stand your ground, but be ready to jump…

Remember that you don’t have to put up with poor management. If you have issues you should face them with your boss, maybe they do not know that they are coming across in a bad way.

However, be ready to recognise if the situation is not going to change. If that is the case, keep your head down and get working on polishing your CV! If it isn’t working, there will be something better out there for you!

Good luck!

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