Taxes for Freelancers and Tools That Can Help
Taxes, for freelancers, is usually a topic of dread. I have always found the process of bookkeeping, accounting and filing to be overly complicated, tedious and time consuming.
And while I am no accountant, just someone who will find any way to get out of spending time on taxes and bookkeeping, I can at least offer a bit of tips and tricks for making the task just a bit simpler.
The first thing you should do
The first step toward keeping your taxes as simple as possible is to set your financials up for success from the beginning.
I strongly recommend – before doing anything else is to create a separate bank account to make your life easier. Keeping your freelance transactions (both payments in and expenses out) separated out will save your hours/days/weeks on bookkeeping throughout the year. You may also want to consider forming an LLC.
Speaking of which, you’ll also want to find a solid accountant that understands the specific needs of self employed individuals. You can usually find a qualified individual in your local area. A good accountant can also help you set up an S-Corp after you start earning some real money (usually advised at or around the $80k revenue mark).
Best tools and services for freelance taxes
Now that we have those initial steps out of the way, it's time to talk about the best tools and services for the job. Below I will list a variety of tools and services that do everything from help you manage your own bookkeeping to running your own payroll (if applicable). I will also include the white-glove concierge service that I use today to put the entire process on auto pilot be but warned – while its a good value for what you get, it isn't inexpensive. (Note: Prices mentioned below are with annual subscription discounts if offered).
Quickbooks
Price: $9-$60
You will, at a bare minimum, need some sort of accounting software to manage your books.
I personally hate Quickbooks. It’s user interface is clunky and to be honest, feels very dated. But Quickbooks remains – at least for now – the industry standard. In fact, you’ll find most accountants and tax pros will ask for delegate access to your Quickbooks account.
Which is why, for the first several years of my business, I simple suffered through to make life easier on my accountant.
It is, at least, inexpensive to use at just $9 per month for a single user and $18 per month for multiple users.
And it will handle all of your basic accounting needs like bookeeping, invoicing, payment collection, tax deductions, mileage tracking, contractors, and 1099 creation.
But if you've never used Quickbooks before – prepare for a steep learning curve. I still have to Google how to do every little thing. The interface feels like it was last updated in 1999.
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Quickbooks Pros: It's the industry standard, everyone uses it. Quickbooks Cons: The user interface is terrible. |
Wave Accounting
Price: Free-$16
Finally, Quickbooks has a competitor. Enter, Wave Accounting.
While I haven't run across as many accountants and bookkeepers willing to use Wave over Quickbooks, Wave's user interfaces and general capabilities much more user-friendly.
Wave Accounting not only allows you to manage your bookkeeping and accounting it also allows you to invoices clients and even run payroll.
And if you're reading this right now and thinking – oh I don't have any employees I don't need to run payroll – you may need to one day if you want to take advantage of S-Corp status and save on self-employment taxes (more on that in the next section).
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Wave Pros: It's a welcome alternative to Quickbooks. Wave Cons: It's more of a Quickbooks competitor than it is a Fiverr Workspace/Bonsai/Honeybook competitor as its actual invoicing features are quite basic by comparison. |
Collective
Price: $297-$349
Or if you’re like me, and don’t mind paying a bit extra just to turn the entire process over to a pro – from bookkeeping to quarterly estimates to tax preparation – consider employing a white-glove solo entrepreneur service like Collective.
This subscription based service was created for freelancers and solo entrepreneurs who hate doing their own taxes and bookkeeping and have been looking for a mind-blowing “set it and forget it” solution.
They even have their own proprietary version of Quickbooks and give you free access to Gusto (a payroll service) so you can do away with those extraneous services and subscriptions.
I’ve blogged about this service and reviewed them extensively if you want to read more about them here. And if you want to take them for a test drive, be sure to use coupon code MORGAN or click here to get your first month free.
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Collective Pros: You can finally quit worrying about taxes and bookkeeping and get back to doing what you do best – running your freelance business. Collective Cons: It's not inexpensive. But then again, paying someone to handle all of your bookkeeping never is. |
What are your favorite tax related freelance tools and services? Let me know in the comments below.
But they don't have to be. Let Collective put your taxes, and bookkeeping on auto pilot.
Members save on average $10k per year structuring their business as an S Corp.
Get your first month free with promo code MORGAN
