Filing Your Taxes, Freelance Writers? Ask Your CPA These Questions

Filing Your Taxes, Freelance Writers? Ask Your CPA These Questions

This is my fifth year of full-time freelance writing, which I’d like to say makes me an expert at freelance taxes.

However, the truth is that I learn something new every year — whether it’s how much to set aside for estimated taxes, what accounting software I should be using or what percentage of my internet bill counts as a business expense.

I will give you this tip, as someone who’s been in the freelance tax-paying game for a while: the best thing you can do as a freelancer is get a CPA, and the second-best thing you can do is ask your CPA questions. Trust me on this one.

Asking the right questions can save you a lot of time and prevent you from getting stuck with an unexpected tax bill in April.

Here are some of the questions I wish I’d asked my CPA when I first started doing freelance taxes, as well as a few items I wouldn’t have known about unless my CPA had told me.

Remember that I’m not an accountant, so if you want real tax advice, you need to ask your own CPA these same questions:

1. Is there a preferred accounting software you’d like me to use?

When I started freelancing, I did all of my accounting on a handmade spreadsheet, assisted by a few Gmail folders labeled “tax deductions,” a box of paper receipts and my bank statements.

Last year, I got a new CPA who suggested I switch to a standard accounting software. This would make her life easier, as she wouldn’t have to decipher my spreadsheets — which make perfect sense to me — and she thought it might make my life easier as well.

Turns out she was right.

If you aren’t already using a freelance accounting software, it’s worth it to try one. The Write Life recommends FreshBooks and Harvest, but you should also ask your CPA if they have a preferred accounting software.

2. What should I do about estimated taxes if my income increases?

This is the one question I wish I had asked in 2014.

The first CPA I worked with looked at my 2013 income and gave me a set of estimated tax vouchers to use on my 2014 quarterly estimated taxes. I got four completed estimated tax forms, each with an amount of money that I was supposed to pay. All I had to do was write the checks and drop the estimated tax vouchers in the mail on their respective due dates.

However, I increased my freelance income significantly in 2014. (If you’ve been following my Tracking Freelance Earnings columns, you know I’ve been increasing my income every year.) I didn’t realize that meant I was paying significantly less in estimated taxes than I should have been paying.

In April 2015 my CPA and I discovered that, thanks to my increased income, I owed the IRS an additional $5,443.

If your CPA gives you estimated tax vouchers, ask what you should do if your income increases.

In my case I started putting aside a percentage of my income to go towards estimated taxes, instead of paying a fixed number on a voucher.

3. What can — and can’t — I do in my home office?

I used to freelance in a studio apartment, and my CPA told me that, since I used the same small table for writing, eating, and watching TV shows on my laptop, it didn’t count as a home office.

To claim the home office deduction, he explained, I had to have a space reserved only for work.

When I moved into a larger apartment, I had enough space to reserve a corner for a home office.

If you want to claim the home office deduction, talk to your CPA about what you can — and can’t — do in that space to make sure it qualifies.

4. Is my laptop a depreciating asset?

Your CPA may ask you about depreciating assets, which are physical items that lose value over time.

You’re allowed to deduct a portion of this asset’s cost over the life of the asset, which is the kind of statement that is complicated enough that you should really leave it to your CPA.

But you should also ask your CPA if your laptop is a depreciating asset. If you use your smartphone for business, or if you have cameras or microphones for vlogging or podcasting, ask about those too.

Any technology that you use for work and regularly replace might count as a depreciating asset — and get you one more tax deduction.  

5. What percentage of my phone and internet bills can I deduct?

If you use your home internet for business — and what freelancer doesn’t — you are entitled to deduct a percentage of your internet bill on your taxes. Same goes for your smartphone bill.

Depending on what your CPA thinks of your home office, you may also be able to deduct some of your utilities. Ask. Don’t assume your CPA will bring it up.

6. Do I need a business license?

Sometimes paying federal and state taxes aren’t enough. Depending on your business, you may need a business license, which comes with business taxes. You may also need to pay city taxes as well.

So ask your CPA whether you need a business license. Don’t just go to your state’s licensing page, search the licenses, and assume that you’re okay because you don’t see a license option for “freelance writer.”

I pay business taxes to the State of Washington under the category “Service and Other Activities; Gambling Contests of Chance (less than $50,000 a year).” That’s why you need to ask a professional about these kinds of things.

7. What deductions should I be tracking?

Freelancers are often entitled to more deductions than we realize — and we deserve to claim all of them. If you go to a writers’ conference, for example, you will probably be able to deduct the cost of the conference, the cost of the travel, and a percentage of your meals.

But you won’t know what you can deduct until you ask. Research materials? Postage? That time you asked another freelancer for an informational interview and paid for the coffee? What about the Lyft you took to interview a source? Or the mileage, if you drove your own car?

There are lots of potential freelance deductions out there, so it’s important to track your expenses — even the small ones — and ask your CPA which of these expenses you should deduct. Don’t forget to ask which deductions you might be overlooking, or which deductions you should track for next year’s taxes — like the cost of that accounting software you just bought!

Getting a good CPA is the first step towards running your freelance business effectively.

Asking the right questions — especially around tax time — is the second one.

Do both, and you’ll probably find that your freelance taxes get easier every year.

Do you have a CPA? What questions do you wish you’d asked when you started doing freelance taxes?

Filed Under: Freelancing
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5 comments

  • Sophie Kisker says:

    Thank you for these tips. If only we got a do-over! This year I saw my husband’s and my expected refund of $3,000 become a tax bill of $500 because of my author income. It could have been worse. I plan to set aside a fixed amount of every check from now on to pay quarterly taxes, and have heard that roughly 1/3 is about the right amount. Have you heard different?

  • Kevin MS says:

    The big question I cannot find a straight answer to online is if a UK resident who is doing a writing job virtually for a US client (physically resident in the UK, never sets foot in the US), DOES that person have to file a US tax return? Or does that person only pay taxes in the UK?

    • No, that person does not have to file a US tax return. Per US-UK tax treaty (www.treasury.gov/resource-center/tax-policy/treaties/Documents/uktreaty.pdf), page 17, Article 14, Income From Employment, “…salaries, wages, and other similar remuneration derived by a resident of a
      Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State.”

      As for paying UK taxes, I expect so.

      I take it that you are an individual not working for a company, even your own company. You might want to send US Internal Revenue Form W-8BEN, “Certificate of Foreign Status of Beneficial Owner for United Tax Withholding and Reporting (Individuals”) (www.irs.gov/pub/irs-pdf/fw8ben.pdf). The reason is that your clients will be justified in not having to withhold some of your income to remit to the US IRS as tax on your income. You won’t have to send your UK tax ID number. The main thing is that your clients have your signature that you are UK citizen who has not received income while in the US on business. See the Instructions for Form W-8BEN (www.irs.gov/pub/irs-pdf/iw8ben.pdf). You want to avoid having your client withholding part of your income. It would be a pain to get it back, especially if your client remits it to the US.

      If you are an entity apart from an individual, use US IRS Form W-8BEN-E (www.irs.gov/pub/irs-pdf/fw8bene.pdf; instructions at https://www.irs.gov/pub/irs-pdf/iw8bene.pdf ).

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