4 tax moves to make before the end of the year if you freelance


Running your own business as a freelancer can offer the opportunity to create your own work schedule and choose your own clients. But some aspects of freelancing are more complicated — like paying taxes.

If you're a full-time freelancer, bring in extra money from a side hustle, or even did a one-off project this year for a single client, odds are good that you have extra tax obligations as a self-employed individual.

The reason: Typically, self-employed workers like freelancers and independent contractors do not have taxes taken out of their pay. You're responsible for paying taxes on that income.

Because taxes as a self-employed worker can take time to navigate, don't procrastinate on planning until tax season. Here are four tax moves freelancers should make before the end of the year.

How to pay side hustle taxes

Video by Euralis Weekes

1. Go over your income records for 2019

"It is crucial for the nonemployee to keep great records of their income and expenses," says Joseph D. Clemens, a certified financial planner and founder of Wisdom Wealth Strategies in Denver, Colorado. "You should keep track or enter your revenue from different contractors on an Excel sheet."

With that in mind, the end of the year is a good time to review your annual income to make sure your records are up-to-date as far as income you've received, expenses incurred, any invoices still outstanding.

2. Create a list of tax forms to expect in 2020

As you go over all the companies you've worked for this year, make a list of all the income-related tax forms, like W-2s and 1099s, you expect to receive next year. That way, you'll know how many forms you're expecting and from whom, and what the right figures should be for each.

At tax time, those records will help ensure sure you have all the right documents in hand before you file — and that you don't forget to report any income.

It is crucial for the nonemployee to keep great records of their income and expenses.
Joseph D. Clemens
Founder of Wisdom Wealth Strategies

3. Go over business receipts

Freelancers can typically deduct business-related expenses from their taxable income, says Steven Zelin, a certified public accountant and founder of Zelin & Associates CPA LLC based in New York City. The end of the year is a good time to compile receipts of business expenses you've incurred.

What's deductible will depend on your business. But Zelin says broadly, purchases and expenses that are "ordinary and necessary" for your freelance work can be deducted. For example, if you're a photographer, a camera you use for work would likely qualify.

It's important for freelancers to keep track of expenses throughout the year to make sure they're not missing any tax benefits. If you haven't been keeping up, now is the time to get organized. You can use accounting tools like Wave or QuickBooks to digitize your paper receipts and keep track of assets and expenses.

4. Plan any last work-related purchases

Given that potential for a tax break, now is a good time to think about any big purchases you want to make before the end of the year that you could write off. Planning ahead gives you time to set aside cash and make the most of year-end sales so that you can score a price break as well as a tax break.

Some effort before the end of the year will help set you up for tax and freelance success in 2020.

More from Grow:

acorns+cnbcacorns cnbc

Join Acorns


About Us

Learn More

Follow Us

All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. It is not possible to invest directly in an index.

Advisory services offered by Acorns Advisers, LLC (“Acorns Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Brokerage and custody services are provided to clients of Acorns Advisers by Acorns Securities, LLC (“Acorns Securities”), a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Acorns Pay, LLC (“Acorns Pay”) manages Acorns’s demand deposit and other banking products in partnership with Lincoln Savings Bank, a bank chartered under the laws of Iowa and member FDIC. Acorns Advisers, Acorns Securities, and Acorns Pay are subsidiaries of Acorns Grow Incorporated (collectively “Acorns”). “Acorns,” the Acorns logo and “Invest the Change” are registered trademarks of Acorns Grow Incorporated. Copyright © 2021 Acorns and/or its affiliates.

NBCUniversal and Comcast Ventures are investors in Acorns Grow Incorporated.