Freelancers can face their taxes come tax time

Those who freelance in the Austin, Texas, area can benefit from knowing more about taxes. If they earn more than $600 from independent work, they are officially considered a business by the IRS. People who have been freelancing for years as well as those new to self-employment need to stay on top of their taxes.

According to Freelance Austin, freelancers will need to pay self-employment tax for Social Security and Medicare when they become profitable. This tax is 15.3% of their income.

While working from home, many freelancers become profitable and decide to pay employment tax on a quarterly basis by the 15th of April, June, September and January. The amount is based on the previous year’s tax return and projected income.

Texas has no state tax; there is a sales tax, however. Consulting with an accountant is a sure way to know whether sales tax needs to be added to a freelancer’s products or services. The sales tax is 8.25% in the Austin area.

Many deductions are allowed for those freelancing. To begin, 50% of the self-employment tax is deductible. Other deductibles include office supplies, professional dues, travel and lodging expenses, website design and management, auto mileage at 57.5 cents per mile with records of miles traveled in a mileage log, professional development training fees, licenses and memberships, and more.

The home office can also be a deduction if a space is used for business only and is on a person’s property. It is important that business expenses be kept separately from personal expenses. Printed receipts and account statements are needed for verification. An attorney who is versed in tax law for businesses and freelancers may be helpful in meeting IRS requirements.