The way we work has changed dynamically over the last decade – and most recently, pandemic shutdowns increased work-from-home capabilities and even catapulted the gig economy. Thanks to improved technologies and greater acceptance of contract-based work, we’re now seeing many skilled professionals change course to full-time freelance work. Most are seeking the benefits of greater flexibility and work-life balance.
From marketing to real estate professionals – the pivot to freelance work is easy and super appealing. But there are many things to consider before totally ditching the 9-to-5 – especially in terms of financial responsibilities and tax obligations. You don’t want to end up in the hot seat with the IRS.
We’ve prepared a list of 3 financial-related things you’ll need to do before making the move to full-time freelance.
1. Understand All Tax Requirements/Obligations
As we mentioned earlier, the last thing you want to do is get into a situation where you owe or worse don’t pay the taxes you’re obligated to. Depending on if you pursue an LLC or choose to be an Independent Contractor, there are tax requirements you need to understand and set up right away. These can vary by state and industry – and several other factors. They can also include self-employment taxes. Depending on how much you earn these tax dollars become significantly high so it’s important to plan. You may even need to pay in quarterly increments. Finding out what will be required of you as a freelancer is important.
2. Maintain Separate Business / Personal Accounts
Keeping your books accurate and separate is key. It’s very important to have a business account and a private account so there is never a question on spending, taxes, and budgeting. Doing so also keeps things simple, easy to manage, and you will be much more prepared if a potential audit ever occurs.
3. Get Professional Accounting Help
Getting help with your accounting – from invoicing to payment tracking and balancing your books, Having another hand in there to double-check your work and just handle these tasks can be such a relief when you’re running the whole show yourself as a freelancer. Save time and hassle by working with a professional company or utilize online accounting software to get everything done.
At DOAAR, our goal is to help businesses from entrepreneurs to large enterprises save time and money in the accounting and reporting process. We employ a team of experienced bookkeepers, controllers, and CFOs and can provide highly customizable solutions based on your needs and budget.