Tax Tips for Freelancers & Independent Contractors in Virginia
Independent contractors and freelancers generally work from their home, have complete control over their schedules and in many cases, take vacations when they want. These are perks to being in business for yourself. However, there are some paperwork considerations that make freelancing more challenging. Because of the need to track income and expenses, it is fairly common for freelancers to seek out accountants who have experience working with freelancers.
Tax Tips for Freelancers
Virginia freelancers and independent contractors should prepare their federal tax filing prior to their state tax filing. Keep in mind, if you are earning over a certain amount of money, you are required to pay your taxes quarterly. The “quarter” is not as straightforward as it may seem; April, June, September and January are when payments are due to the IRS. In Virginia, if you are single or filing separately, you do not need to file taxes unless your adjusted gross income is above $11,950 and if you are married, the amount increases to $23,900.
Expenses Allowed for Independent Contractors
Fortunately, while you are responsible for 100 percent of Federal Social Security and Medicaid payments, you also have the benefit of taking numerous deductions as a freelancer. The Internal Revenue Service allows freelancers to deduct expenses that are necessary to the successful operation of your business. This may include subscriptions, online services, bank expenses, partial expenses for the use of your home and more. In most cases, it is best to work with an accountant who understands freelancer expenses as they can help ensure you get the deductions you are entitled to.
When Quarterly Payments Are Necessary
Any Virginia independent contractor or freelancer is required to make quarterly tax payments if their estimated tax burden exceeds $150 for the year. The best way to calculate this is to estimate your income and expenses at the start of the year and prepare to set aside funds on a monthly basis to pay your quarterly taxes. Remember, you have to pay federal as well as state payments quarterly to avoid paying a penalty.
Working With an Accountant
Before you hire anyone to help you with taxes and other financial matters, make sure the company understands your specific business and your needs. You want to work with accountants who understand single-person business ventures and the unique challenges you are facing. Hiring accountants for freelancers is helpful for numerous reasons; first they can help you estimate what you will owe in taxes, they can help negotiate with the IRS and the Virginia Department of Taxation in the event you cannot pay the full tax amount on a quarterly basis and they can ensure you are getting all the deductions you are entitled to.
If you are a freelancer or an independent contractor, you may think hiring an accountant is an unnecessary expense. The fact is you can benefit significantly by working with accountants for freelancers and the expenses are tax-deductible. Whether you are a new freelancer or a seasoned independent contractor in Virginia, contact Rue & Associates at (804) 730-7455 and find out more about the services we offer to small business owners in your position.