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. It is necessary you get more information on how taxes work for the freelancers when thinking about becoming one. Understand that the employees’ taxes are different from the self-employed people. Hence, you need to look for a genuine website that will guide you know the taxation guidelines for freelancers. The target is to avoid problems with the IRS. Below are the crucial considerations for the employees vs. freelancer taxation.
The employer handles the taxes for all his employees. The money you get when you are employed is less different from voluntary and mandatory deductions. The employer will withhold your income tax for the month and make other voluntary deductions. Your income bracket and where you live will impact on the taxation rate. It is also wise you learn more about things that can help you pay fewer taxes. It is, therefore, wise you find a genuine website that will assist you to know the various tax forms to use when you are an employee. You should also get more information on your State taxation.
You are liable for handling all matters relating to the taxes when you are a freelancer. Know that payments from the clients have zero mandatory and voluntary deductions. 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. Therefore, you need to get more information on how you can ease your work. Some freelancers opts to hire accountants to help them when calculating the taxes and ensure they pay them on time. The other option is to find software that you can use to calculate the taxes when you are a freelancer. It is, therefore, wise you examine these options to decide the one that will work best for you. You can deduct certain expenses from your income as a freelancer reducing the amount you pay in taxes.
It is thus crucial you keep a record of the income you earn as a freelancer for a given period. You may opt to use a spreadsheet to keep track of the money you have earned in the years.
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