Freelancing has taken the world by storm. Bringing with it flexible work schedules and a healthier work-life balance, it’s no surprise that 73 million Americans are doing some form of freelance work. In fact, 64% of Gen Z want to work for themselves, explaining that they want to chart their own future and have plenty of entrepreneurial traits.
But entering the freelance market requires more than just skills in and determination. You also have to think about your own finances on top of meeting deadlines. This administrative work can be tough for freelancers, especially copywriters, as it can be confusing without the proper training and experience. So, if this sounds like something you’re having trouble with too, we’ve come up with a list of everything freelance copywriters need to know about accounting.
Establish Billing Policies
Your freelancing contract should state your terms for payment, such as when you’ll be paid, how you’ll be paid, and what penalties you have for late payments. While some people advocate for payments upfront, clients are usually much more comfortable with paying after a project has been delivered and they’re happy with it. As long as they’re clear on your charges and your timeline, getting paid shouldn’t be a problem.
Taxes and Regulation
Remember that even though you’re a freelancer, the government can still tax your income. If your net profit is $400 or more, then you need to start filing. The self-employment tax rate in the U.S. is currently 15.3% of your first $132,900, where 12.4% is allocated to Social Security, with the remaining 2.9% going to Medicare. An additional 2.9% applies to any income beyond that limit. (And that’s in addition to your regular tax rates.)
In line with this, it is important to consider the tax deductibles you can take advantage of. For instance, if you work from your home office, you can deduct expenses related to home office use. Look up tax laws in your state to see if any additional municipal tax deductibles apply. (And if you’ve taken advantage of a professional discount at some point, it’s likely the item you bought is work-related and tax-deductible.)
Keep Your Income and Expenses In Order
Keep your business income and expenses organized at all times. This helps you with your tax bills and ensures that you can stick to a monthly budget. A simple Excel spreadsheet can help you get your numbers in order. Or opt for a software program like Mint or FreshBooks to help. Some applications even allow you take a picture of your receipts and organize them online. Come tax season, you simply have to send those pictures off to the IRS.
Keep Separate Accounts
It may seem easier to keep all of your money in one account, but this is a mistake. Minimally, have a separate account to set aside money for your taxes to help ensure you’ve got enough money when tax time comes.
Hire an Accountant
Sometimes, all the financial work that comes with freelancing can get overwhelming, especially if you’re freelancing on the side, or just starting out. The best way to ensure that you’re complying with all the necessary tax laws and regulations is to hire an accountant — which makes it the best (and first!) investment you should make. They also aren’t just there to help you with your taxes, as accountants can teach you how to handle your budget, save more money, and save you time and effort in handling your finances.
Staying on top of your accounting may not be your top priority, but it is a responsible part of doing business. Let an accountant handle it, or make sure you’re on top of all your transactions to keep up with the mandatory taxes. Just stay organized and know how to make your resources work for you!
About the Author: Freelance blogger and yoga teacher Reese Jones wants both amateur and veteran copywriters to know that it’s possible to take charge of their financial future. When she’s not scouring the news for the latest financial apps and software, she spends her free time tending to their backyard herb garden with her husband Tom or running the trails with their golden Labrador Ashley.
Do you have any accounting tips you could share with new copywriters? Tell us about them in the comments!
Last Updated on November 27, 2023