Do Freelancers Need an Accountant to Do Their Taxes?

virtual accountant for filing taxes for freelancers

And that’s why banks are very careful and do not just lend to anyone. They need to ensure that an individual can afford to pay their loan. These and more questions often prop up in online and offline discussions. Many Pinoy freelancers barely know about filing and paying taxes because existing rules are not as clear-cut as those for other types of taxpayers, such as employees and corporations.

If you were supposed to pay quarterly taxes but didn’t, you won’t be in legal trouble, but you will have to pay a penalty fee. If you owe more than $1,000 when you go to file your 1040 annual tax return, you will have an underpayment penalty. Not everyone is going to automatically owe once they start turning a profit from their business. There’s a lot of different factors that play into people’s taxes. But know that if you’ve filed your taxes and there was money owed to the IRS, that’s the immediate signal that you need to start paying quarterly taxes. A sole proprietor means your business taxes are not separate from your personal taxes.

What you need to know Value Added Tax (VAT) for freelancers

Backed by our Full Service Guarantee.You can also file taxes on your own with TurboTax Premium. We’ll search 500 tax deductions & credits to provide comprehensive coverage. The IRS imposes a 12.4% Social Security tax and a 2.9% Medicare tax on your net earnings.

When purchasing a home in the Philippines, you can provide other documents to prove your ability to pay even if you are not employed by a firm and do not have payslips as proof of income. Examine all of your revenue sources to see if you can find any supporting evidence. These forms should be duly accomplished and filed, BIR Form 1701 (Annual Income Tax Return) and BIR Form 0605. All self-employed and mixed-income persons are mandated to pay their annual and last quarter income tax.

Services to Offer as a Virtual Assistant

The IRS, where you file your taxes, has a handy tool known as a Tax Withholding Estimator, that can help you figure out what you owe. It’s particularly useful for those who are employees as well as freelancers. And when you’re ready to actually handle filing taxes, the Internal Revenue Service (IRS) is the federal agency accountant for freelancers to which you do the filing. With all these forms and other information to track, you can understand why record keeping is so important when it comes to filing taxes for independent small businesses. No monthly minimums are needed for this cutting-edge billing, invoicing, receipt-scanning, and expense-tracking tool.

Those professionals who are classified as self-employed are those who practice their profession, with or without a license under a regulatory board or body. They will receive payment for the service that they do but they would not receive benefits and compensation the same as what employees get. The examples of those self-employed individuals are private practice physicians, lawyers, and accountants who are on a pay-per-service basis. All self-employed and mixed-income persons are mandated to pay their quarterly income tax. These forms should be duly accomplished and filed, BIR Form 1701Q and BIR Form 0605. Once you find a qualified tax professional, you need to spend some time with them, first to make sure they know all there is to know about how to pay taxes as a freelancer.

When Do Freelancers Need an Accountant for Taxes?

Since most freelancers work from home, the home office deduction can apply. The IRS allows you to take a deduction for many expenses ranging from rent to utilities for the portions of your home that you use as an office. Picking up a side hustle or becoming your own boss full-time can change a lot in your life, including your taxes. If you did any freelance or independent contract work last year, here’s a guide to help you understand some of the major to-dos in managing your taxes. For tax purposes, all freelancers (including Virtual Assistants), are sole proprietors – even if they have filed as a single-member LLC.

  • If you do not belong to the category that is exempted from paying their income tax, you have to register with the like everyone else to file your taxes.
  • In addition to regular income tax, freelancers are responsible for paying the self-employment tax of 15.3% in 2023.
  • Pad your account with another 10% to ensure you have enough cushion to cover ALL taxes, like income tax, state tax, or really high tax situations (like California).
  • In this article, we will cover critical concepts like- freelancer registration, the requirement of BIR, when to pay your taxes, etc., so that you get free of your tax worries.
  • Income — Keep records of money you receive from gig work and sales.
  • In the Philippines, freelancing has become the most common source of income ever since the pandemic started.
  • It also looks at some of the deductions available to freelancers, steps of paying income tax in the Philippines, registering your freelance business in BIR, BIR forms, etc.

Record meetings, phone calls, work hours, and travel in a calendar to show consistent activity. Spend money wisely and demonstrate that your expenses are being used to earn income and make a profit. Retain all digital and hard copy receipts, invoices, IRS forms, tax returns, and other pertinent documentation for at least seven years. If you think the holidays are the best time of the year, you have clearly never experienced the magic of tax season.

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