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Hey everyone! My name is Evie and, like a true Capricorn, I actually enjoy working — but I also like to travel and NOT work.
The standard corporate 8-to-5 work day and 10 days of PTO always felt limiting to the life I wanted to live. That’s why I decided to start working for myself as a freelance writer and editor.
And while I love the freedom of being self-employed, when it comes to managing time, money, and clients, it can be more than a little tricky. Here’s what I’ve learned over the past few years:
1.Taxes are totally different. For starters, you have to pay self-employment tax.
2.And if you don't set aside money for taxes throughout the year, you'll get hit with a giant tax bill — and you may or may not have the profits to pay it.
3.You also have to pay your taxes quarterly.
4.To make figuring out your taxes easy (well, easier), you should have a separate bank account and credit card for work.
5.You also have to keep track of the items you buy in order to do your job. It can end up becoming a tax benefit in disguise!
6.You can even write off your home office or workspace as a deduction.
7.You might also consider asking a professional tax preparer about any additional business deductions you might qualify for.
8.Since tax law is always changing, it might be worth paying someone to do your taxes. This way, you won't miss a new deduction or make a newbie mistake.
9.Creating an invoice is a need-to-know skill; it's how you'll request payments from your clients.
10.But if your clients forget to pay you, it's your responsibility to follow up and make sure you get what you're owed.
11.When you're self-employed, you have to take a more hands-on approach to paying for your healthinsurance.
12.And, it's extra important for you to be proactive about saving for retirement.
13.Keep in mind that your monthly income will fluctuate — and that's okay. You'll just need to be prepared for these instances.
14.And, understand that you might lose a client from time to time — and that's okay.
15.Lastly, the more efficiently you work, the more money you can make.
What's one thing you wish you knew before becoming self-employed? Let us know in the comments! You could be featured in an upcoming BuzzFeed Community post.
If this sounds like music to your ears (and bank account), check out more of our personal finance posts.
To maintain your lifestyle while self-employed, your business profit must cover all your personal expenses. Otherwise, you'll go into debt. If you don't already have a personal budget, list each of your basic monthly expenses, including food, rent, utilities, debt payments, etc.
Self-employment is earning income without being employed and paid by someone else. Self-employed persons may be involved in a variety of occupations but generally are highly skilled at a particular kind of work.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
If your business is established and profitable, pay yourself a regular salary equal to a percentage of your average monthly profit. Don't set your monthly salary to an amount that may stress your company's finances at any point.
Earned income also includes net earnings from self-employment. Earned income does not include amounts such as pensions and annuities, welfare benefits, unemployment compensation, worker's compensation benefits, or social security benefits.
The self-employment tax is collected from workers who earn income but don't pay withholding taxes through an employer. This includes sole proprietors, freelancers, and independent contractors who carry on a trade or business.
The short answer is no. If your passive income is defined as such by the IRS, then it isn't subject to self-employment tax (although it will likely be subject to income tax). There are two types of passive income according to the IRS. The first is a trade or business you do not actively participate in during the year.
You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more. Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment.
Introduction: My name is Kimberely Baumbach CPA, I am a gorgeous, bright, charming, encouraging, zealous, lively, good person who loves writing and wants to share my knowledge and understanding with you.
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