Tax season is officially upon us and isn’t going anywhere until spring. If you’re a freelancer, this can be a stressful time of year if you haven’t been proactive about your bookkeeping. Even if you’re not a numbers person, it’s easy to stay on top of your accounting if you have the right systems and tools in place to help you out.
To support the many freelancers and independent contractors on the Viewpost network, we’ve put together a list of 10 bookkeeping tips to help you stay on track with your taxes and keep your cool during tax season and throughout the year.
1. Save a Percentage of Your Income for Taxes
When you get a paycheck from an employer, a percentage of your income is automatically deducted for state and federal taxes. When you’re a freelancer setting your own rates, getting paid by customers, you have to make these deductions yourself.
Set aside an appropriate percentage of each payment you get from your clients and put it into a separate checking or savings account.
That way, when it comes time pay your taxes, you’ll have sufficient funds already set aside that aren’t mingled with your other personal or business funds. To figure out how much you should be setting aside, there are many online resources that can help you estimate. Check out this article from the Wall Street Journal for more advice.
2. Keep Track of Your Expenses
While this tip might seem elementary, many freelancers wait until tax return preparation to finally sort their expenses for the year, sifting out business items from personal items.
The easiest way to track and manage expenses is to open a separate checking account to use for business transactions. It’s not necessary, but it can help streamline your bookkeeping and help keep you organized in day-to-day spending.
3. Document Your Receipts
While we’re on the topic of expenses, don’t forget to keep track of your receipts. These records are important information if you happen to be audited or if you ever need to double-check or confirm an expense.
The good news is that in 2016, you don’t have to hang onto your paper receipts, you can document them via your mobile phone. Apps like Expensify allow you to take pictures of your receipts and then recycle the paper so you don’t have to worry about it.
4. Let Software Work for You
Using a bookkeeping software can help you automate tracking for your income, expenses, and deductions without much labor on your part. If you’re already using Viewpost to send invoices and receive payments, you can easily sync your Viewpost account with your QuickBooks® file or Microsoft Dynamics® GP file.
5. Don’t Fall Behind
Get into a routine that forces you to keep up with your books on a weekly basis. Even if it’s just a few minutes every day, or a few hours one day per week, developing this habit will ensure you don’t let your finances slide and will put you in a good place when it comes time to file your taxes.
6. Hire a CPA to Help You
Sometimes it’s best to just hand things over to the experts. If you’ve reached a point where you’re confused, your finances have become too complicated, or you’re making a lot less or a lot more money than you projected, it might be a good idea to hire a CPA. With their knowledge, a good CPA can help guide you through deductions and adjusting your withholdings to match your expected income.
7. Get Your Clients to Pay on Time
When waiting to get paid is a common occurrence, it can be difficult to keep track of your income. Ensuring your clients pay on time can help you be smarter about your budget, your projected income, and above all, your cash flow.
With Viewpost, you can easily see when a client has received your invoice and when payment is on the way. Intrigued? Learn more here.
8. Be Strict About Your Budget
The most effective way to ensure a clean tax record and an easy filing experience is to be strict about your personal and business budget. Use a free service like Mint to track and monitor your spending habits and set savings goals. Developing and following these healthy financial habits will help your business grow and thrive in the long run.
9. Follow the Rules
Above all, abide by the IRS deadlines and be steadfast in double and triple-checking to be sure you’re filing everything required. The type of forms you fill out can depend on the type of business you own, so get familiar with irs.gov and hold yourself accountable.
10. Ask Other Freelancers for Advice
If you’re just starting out and the thought of bookkeeping sounds overwhelming, don’t panic. You’re not the first freelancer to feel this way. Find someone in your network who is experienced in running their own freelance business and ask them for advice. Lucky for you, the freelance community is largely a friendly one, so don’t be afraid to ask for help.
So, there you have it. Did you find these tips helpful? Have more freelance bookkeeping tips do you have for emerging and successful entrepreneurs? Join the conversation.
Let us know @Viewpost on Twitter and we’ll give you a shout out. Thanks!