Boring Freelance Tax-Related Question

[Jimmy!]

I have recently started taking on some extra design work, and received my first freelance paycheck. After the initial swell of pride subsided, I realized, "Oh yeah. I'm going to have to claim this for tax purposes." This is going to be a steady side gig (hopefully), so my question to the freelance designers of the world is this. What is a good percentage to set aside for taxes? I have 20% in my head, but I'm not sure if that number is too high or too low.

 

Thanks!

 

 

[BrandMooreArt]

my recommendation is to actually find a "tax guy" and talk with them. taxes can be a bit different state to state, so its best to consult with someone who knows the local laws. and be sure to keep your receipts (or bank statements will do) for anything you buy that can be considered a business expense to ease those taxes.    

[TalktoChuck]

A lot of it depends on individual things; What state you are in, is this your sole source of income or do you have a full-time job and this is a second job, how much income are you bringing in, your business org structure, etc.

 

The short answer to these things (like BrandMoore pointed out) is to find a tax guy. It'll save you a lot of guesswork.

[Broken Record]

I'm a full-time freelancer and I previously worked at a CPA firm for 20 years. To be safe, you'll want to hold back 30%. The advice here is good. There are a lot of factors that can affect that number, so it's best to check with a tax professional.

 

Depending on how much you make, the Feds are going to want you to file quarterly estimated tax returns, but you can worry about that later.

 

Oh, and get a separate bank account for all your business stuff.

[Mac the Knife]

14 hours ago, Broken Record said:

Oh, and get a separate bank account for all your business stuff.

This.  In fact, if you're going to do this on any kind of regular basis, go an extra step and set yourself up with your own limited liability company.  They can be a PITA, but you can do some things (and have some legal protections) through it that you can't as a sole proprietorship.

 

Oh... and if you go that route?  Check with me first.  I can't tell you how many corporations and LLC's I've done the necessary paperwork on.  A lawyer will charge you a boatload for what's often essentially filling out one damned form.  I can be had a lot cheaper.