Taxes
Working for yourself is awesome. But the taxes and saving for your taxes is definitely not. Let's go over a few tips for saving for taxes when you're self-employed.
Let's go over the basics first. Any worker who makes over $600 a year had better plan on paying taxes. If you were an employee, your company would withhold a portion of your wages for Social Security and Medicare taxes. When freelancing, it becomes 100% your duty to make sure Uncle Sam gets his share of your income for Self-Employment Taxes.
It's up to you to calculate what you should set aside and then force yourself to save that money until tax time. And let's face it, hardly anybody is good at saving money. In fact, 70% of your fellow Americans couldn't cover an unexpected $500 expense tomorrow. So don't feel too bad, you're definitely not alone.
What you need to pay
It's important to know what taxes self-employed workers need to pay and when. You're going to have to file your annual income return but also pay quarterly taxes. The quarterly taxes are for your Medicare and Social Security. W2 employees pay these too but the employer picks up a portion of the tab and the taxes are taken out before it hits their bank accounts.
As a freelancer or small business owner, it can be quite tempting to reinvest all the income you receive. It can also feel like you have more money than you really do. Who has to pay quarterly taxes? In general, you'll have to pay if you're self-employed and expect your tax liability to be more than $1,000 for the year.
