As a Freelancer, Here Are My Top 3 Tools to Make Tax Season a Breeze

As a Freelancer, Here Are My Top 3 Tools to Make Tax Season a Breeze

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  • I calculate my earnings — and the way a lot to put aside in a financial savings account — on the finish of each month.
  • I’m cautious to monitor my enterprise bills and do not draw back from spending cash on useful issues.
  • I preserve in depth data throughout a number of Google Sheets paperwork utilizing templates from my accountant.

It’s virtually that point of yr once more: tax time! As a freelance business owner offering a number of companies as a author and dance trainer, I want to be on prime of my bookkeeping recreation in order that I’m at all times prepared for tax season.

Working with my monetary advisor and accountant helped me create a construction to make tax season a breeze. Here’s how I do it.

1. Know how a lot you owe

As a freelancer and small enterprise proprietor in Canada making greater than $30,000 a yr, there are two sorts of taxes I want to pay: revenue tax and HST (Harmonized Sales Tax). The latter is an quantity that will get added onto every of my invoices and is paid by the consumer. This cash doesn’t belong to me. I repeat: This cash doesn’t belong to me.

The construction I established with my monetary advisor, Liz Schieck at The New School of Finance, consists of two savings accounts earmarked for taxes (revenue taxes and HST). At the top of every month, I take advantage of my nifty bookkeeping trackers to calculate my earnings for the month and decide how a lot cash wants to go to my tax-related accounts. For my revenue tax, I take advantage of a better-safe-than-sorry proportion in order that I’m not caught out when the federal government comes to accumulate. Right now, that candy spot is 29% of my complete earnings earlier than tax.

This proportion is deliberately padded and signifies that I’ll probably have a little cash left over after paying my taxes. The HST quantity is simpler to calculate, as your entire quantity belongs to the federal government. Once I’ve executed the sums, I then shuttle the funds into the related accounts and preserve a file of the transfers.

2. Be good about enterprise bills

One of my biggest takeaways from the 2021 tax season was that eligible enterprise bills assist develop your corporation and shrink your tax invoice. I have a tendency to err on the facet of frugality, however when my accountant reviewed my meager enterprise bills final yr, he provided me an vital piece of recommendation: Investing within the items and companies that may enable you to do your work higher and attain extra purchasers is sweet enterprise.

In 2022, I sprang for the skilled Zoom account, I engaged in skilled growth, and I purchased a ballet barre for my residence studio.

3. Make a plan and work the plan

I’ve a textbook kind A character, and I put this to good use when it comes to my bookkeeping. I preserve clear data, have useful instruments in place, and I do as a lot of the leg work as potential earlier than sending my paperwork to my accountant. Essentially, I make his job straightforward. His phrases, not mine.

For my bookkeeping, I depend on two digital trackers. One is for my invoices and enterprise bills and the opposite is for my private bills, payments, and contributions to financial savings. Both are on Google Sheets primarily based on templates from my financial advisor.

In the previous, I preserve monitor of my invoices, breaking out taxes and together with file paths to the digital invoices for simple entry when making ready for tax time. In my private expense tracker, I cross-reference my financial institution accounts and bank cards with my payments and auto-deposits to financial savings accounts and investments.

Keeping clear data and staying organized signifies that every part is the place I want it come tax time. By mid-February, I begin constructing the digital package deal for my accountant (and sure, I’ve a Google Sheet for that too!) I additionally ship him an e mail to let him know when to anticipate my file for his tax preparation subsequent steps. By mid-March, often the weekend earlier than my birthday (completely satisfied birthday to me?!) I ship my accountant a digital package deal, full with calculations. Last yr, I paid my taxes in full before the filing deadline. And then I paid my accountant. All earlier than April 1, as a result of I’m no April idiot. Mic drop.

The professional-approved instruments and constructions I’ve put into place assist take the stress out of tax time. And my low tolerance for lacking a deadline signifies that I begin early and file early.