It's almost the end of the year, and for most freelancers, that also means the end of our fiscal year. Hopefully, you've been keeping the books and aren't scrambling to get everything in last minute.
In this short post, I'm going to share a few tips for keeping an eye on your finances and avoiding tax overpayment.
The Big Tips
Create a separate business bank account. Whether it's a small local bank or credit union or a large bank brand that you trust, it's really best to separate your personal and business assets, even if you're a sole proprietor / one-person LLC. Aside from the legal benefits separating your assets offers (keeps people from suing for your personal stuff should something go awry), it also just makes bookkeeping so much easier. Additionally, if you're using payment processors, like PayPal, have separate business accounts.
Collect your receipts in one place. For me, 95% of my receipts are electronic. I send them all to a single email address, tag them "Business Receipts," and use the starring system in Gmail to keep tabs. Once I've entered or confirmed an item in my accounting system, I use the green checkbox "star" to remind myself it's been recorded. Wave also has a receipt upload app, but I'm admittedly terrible about using it. Depending on the service you use for accounting, you may be able to automate reporting from your bank account. Which brings me to the next tip...
Use accounting software or be prepared to be meticulous with your spreadsheets. Wave is fantastic for freelancers. I use it to keep tabs on my accounts, send invoices, collect payment, code so I can get an "at a glance" view of my expenses/revenue/profit/overdue invoices, and keep track of my vendor payments. Knowing where you want to be and where you are is really helpful when you need to make business decisions like "can I afford this new software license?"
Keep up with bookkeeping. At least once a month, make sure you document your expenses and income.
The Write Offs
Don't forget that your business expenses can be deducted from your net profit. You should not be paying taxes on income you didn't make. Most of the write offs below apply to eLearning freelancers in the US, but definitely confirm with your accountant:
Office equipment - Desks, chairs, furniture, all the things it takes to make a workplace comfortable (assuming you have a home office that qualifies - different states have different rules)
Computer equipment - If you upgraded your laptop, bought a new printer, or got a docking station that will be used specifically for work, you can write it off.
Software - As eLearning freelancers, the cost of licenses can really stack up. Keep tabs on your costs. These are write offs.
Training & education - Did you take my course on the Upskill Experience to improve your script writing, build your brand, figure out business basics, or improve your consulting skills? Guess what?! That's professional development, and it's a write off. Same goes for professional conferences and association fees.
Professional services - Outsourced help should be written off. For IDs, that's often graphic design, voice talent, and QA services for hire.
Health Insurance - If you paid your premium out of pocket, it may be a write off. It's typically one of my biggest expenses.
Utilities - Internet, phone, and other utilities can be written off. Percentages will vary based on the utility and how dedicated it is to for-work use.
Tax Prep - Did you use an accountant to help you prepare your taxes? Write their fee off.
Want to get a better grip on bookkeeping and business basics? Check out this 90 minute pre-recorded workshop with my favorite accountant and former freelancer turned small business owner, Paige Papaioannou (yes, she's my sister, and she's totally awesome at what she does) on the Upskill Experience.
Or if you're looking for the COMPLETE CRASH COURSE on freelancing as an eLearning professional, check out the eLearning Freelancer Bootcamp.