If you have been writing articles and other content for clients for a while as part of a freelance writing business, it is possible that you don't know much about how to handle your business finances. To help yourself at tax time and encourage you to make good business decisions, it is vital to get organized. Use these suggestions to help do that.
Create a Filing System
You might be too busy to organize invoices and other documents you have laying around, but in order to stay on top of things, it's a good idea to create a filing system. Keeping separate folders for invoices, receipts, and other things will give you a sense of relief when it's time to file taxes and will save you a lot of time during the year; you won't always be searching for things in a mass of papers on the desk. When your system is in place, you can simply sort your papers each day and drop them where they belong before ending work for the night.
If you keep all your documents on your laptop or computer, it is still a good idea to print out your paid and unpaid invoices and put them with your other files. You don't have to do this all the time; you can generate reports periodically to keep yourself on track.
Separate Your Writing Finances from Your Household Finances
Because you are getting paid to do something you like to do, it can be a challenge to think of freelance writing as your business. However, as far taxes go, you will likely start paying self-employment taxes whether you feel like you own a business or not. These taxes can seem steep at first, but you might be eligible for a number of deductions and credits for your home office and various equipment expenses.
For instance, if you bought a computer that you'll only be doing for your freelance writing work, you may be able to write that off. Gas mileage used to visit people you are interviewing for an article is another example of something that might be able to reduce your tax burden.
In order to be successful when you try to reduce your taxes, however, it is critical that you separate your writing finances from your household expenses. This will make it easier for you to track spending so you can accurately arrive at the right figures. If you keep your writing finances tangled up with your personal finances all year, it may be a nightmare to sort through pages and pages of printouts to find writing-related items.
Open a checking account that you only use for your writing business. You might also want to make use of prepaid debit cards so that when clients pay you, you can withdraw to that specific card; you can then limit your writing expenses to that card.
Try out the ideas above to help yourself become more orderly with your business. Chat with a small business accountant (such as one from Balkcom Pearsall & Parrish CPA's PA) who can give you even more suggestions for keeping your freelance writing business organized. They can also provide tax assistance and help you with other small business financial decisions.