As much as I loved international accounting in business school, freelance taxes just turned out to be a much different, and much more personal game. Eventually, I think I’ll be able to forgive my former self for the unnecessary stress and confusion, but in the meantime, I want to talk to you about what works for me, and that’s paying my taxes every month.
On the 15th (ish) of each month, I’m on EFTPS.gov paying taxes like they’re a bill. I’ve tried saving up all year (not…a good idea) and making quarterly payments (meh) and for my peace of mind? This just works better. I think there are 3 reasons why…
It Keeps Me Up to Date
I really dislike deadlines. Adding four more to my life for quarterly payments? I’m good.
By paying monthly, I don’t have a reminder looming over my head of some big event in the future. It’s a habit (and you know I love good freelance habits) so it’s one less thing my mind has to actively carry around.
It Aligns With Other Bills
The personal finance world is built around employment and the steady paycheck. The way everything works, from our mortgages, to automated savings options, to our cable bills goes right back to the employer.
I don’t live in that world anymore, but the rest of my bills do…so I just tossed my tax bill in there with them. Again…one less mental burden to deal with because pretty much nothing else in my financial obligation life runs on a quarterly basis.
I Don’t Get Attached To the Money
This is the big one, because freelance tax bills can be ugly. I remember even when I was employed those deductions were offensive. Now? Paying out around 35% of my income in taxes is just something I’ve learned to accept as a freelancer (and mind you, I don’t pay state taxes).
You know what’s worse though? Seeing 3-12x that amount sitting in an account and THEN paying it out to the government (especially one run by an aggressive, racist, mediocre businessman turned game show host…petty? IDC. It still stings more.)
I’ve been on a push to average $800 dollar days ($16K months) since running my numbers on this freelance calculator from Nation1099, and I’m sorry, but writing out checks that size 4 times a year would have me wanting to see a therapist.
So yeah. That’s how I handle it. I’m just rounding out my first year, so if anything goes wrong when I actually file in 2019, I’ll let you know.
If you still feel completely lost, check out Freelancers Union’s First-Time Freelancers Guide to Taxes and sit down with their webinar: What Freelancers Need to Know About Taxes while you’re at it. In the meantime, I’m digging into how I can move my LLC into S corp status so I can avoid some of these self-employment taxes.
P.S. If you’re not in the U.S. and have any tax tips for your country, drop them in the comments!