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Freelance tax questions

2 points by FLanceTaxes ↗ HN
I've been doing freelance programming work for the last year, and have completely neglected to do anything about my taxes. Yes, I realize this is probably pretty stupid, but here I am.

That being said, I've lived very frugally, and have saved ~75% of what I've made. My expenses have been minimal, and I've kept records of all my purchases.

This will be the first year I haven't had a job which takes care of my taxes for me. Previously, I've just used TurboTax for them. Honestly, I find the US tax system to be very confusing, and I was just looking for some answers to some basic questions.

1. Would TurboTax still be acceptable to use?

2. I'm planning on writing off 80% of the rent for my home office (not the whole apartment) and internet connection. Any other write offs I may be forgetting?

3. I'm married, and my wife has a regular job. I'm not sure if this changes anything with our joint filing. To be honest, I haven't formed an LLC, sole proprietorship, have a business license or any of them (this part does worry me a bit).

Happily, I live in a state that has no income tax. So I'm assuming I won't have to worry about any state taxes.

I just feel really uncomfortable doing this without the typical employee provided W-2 and the like. Any advice and guides/resources would be very helpful. I've done a good amount of web searches, and there seems to be a lot of conflicting advice.

And lastly, is it really terrible that I've waited this long? I know I can file quarterly, but as I said, I've saved the majority of what I've made so far, so I wouldn't have a problem writing one big check to uncle Sam.

Thanks for reading, and I look forward to any answers and advice you all may have.

6 comments

[ 11.6 ms ] story [ 229 ms ] thread
Hexx
You're going to have to pay a penalty because you did not pay your estimated taxes and probably owe a lot.
mjs00
Talk to a CPA asap -- they can minimize it by looking at your total picture, what 'net' income is after expenses, etc, ... and penalty is from when due each quarter until the point you pay, so it is worthwhile to do NOW rather than waiting until April 15.
jf271
If you are thinking you can deduct 80% of you rent you really need to find an accountant.

You should make an estimated payment before the end of they year. It will cut down on your penalties. Find an accountant quickly.

FLanceTaxes
As I said, 80% of just the office, not the apartment. I heard this was safer than writing off the entirety of the home office.
kls
I'm planning on writing off 80% of the rent for my home office

be careful with this, a room cannot be consider even if 1% of it is used for dual purposes. For example if you have an office but you use it as a child nursery too. 80% of your dwelling is going to raise a red flag.

Second, if you are going to be freelancing you need to file for an S-Corp it helps you to opt out of some taxes. It will lower your effective tax rate because it get's rid of some of the FICA tax and because it allows you to take some of the earned income and transfer it over to capital gains.

You also really need to go to a good CPA, they cost around $300 to $600 and they will save you far more than that. The first year I went to a CPA they saved me 10k from the best I could do on my own. Not getting a CPA while freelancing is throwing money away. It is the quickest thing you can do to improve your bottom line.

FLanceTaxes
Ahh.. I think you're right. My records are great. I'll just go to the CPA. Will also talk with them about the S-Corp.

Thanks for the reply!