Key Things to Know About the Freelancer vs. Employee Taxation
Being a freelancer gives you the control to decide when to work and the clients to choose. Before you become a freelancer, it is wise you learn more about the taxes you will be paying. You need to know that taxation works differently between the freelancers and the employed people. You require to find online platforms that will assist you to know how the taxes work for self-employed people. The target is to avoid problems with the IRS. Continue reading this blog now to see the key things to know about the freelancer vs. employee taxation.
When you are employed, your employer will be handling the taxation on your behalf. The money you get when you are employed is less different from voluntary and mandatory deductions. Therefore, the employer is the one who will make your tax payments and direct other voluntary deductions. The taxes you pay when you are employed will be determined by how much money you earn and the State you work. Also, other factors such as the number of dependents will influence the taxes you pay. To know more about the taxation forms to use when you are employed, you need to find the best site to use. It is also necessary you discover more about the local and State taxes.
If you decide to become a freelancer, you need to know that you will be managing all things relating to the taxes you pay. Your clients will not deduct the taxes from the money they pay you for the services you offer to them. It is therefore up to you to keep a good record of all the incomes for a given period to decide the total amount to pay in taxes. It may be challenging for new freelancers to handle the complex taxation process. It is wise you look for resources that will guide you on how to handle this task. Some freelancers opts to hire accountants to help them when calculating the taxes and ensure they pay them on time. Other prefer to invest in an accounting and taxation software, where they input their incomes and the software calculate the taxation. You should therefore compare these two options to determine the one to use. The other thing is to learn more about the tax write-offs you are eligible to get as a freelancer.
Handling the taxes as a freelancer does not have to be hard when you keep a good record of your earnings. Look for ways you can develop effective bookkeeping skills to keep track of the money you earn and the expenses you incur as a freelancer.