A Freelancer’s Guide to Taxes

Being a home-based freelancer offers perks such as flexible working schedule, multiple jobs you can do at the comfort of your own home, and having more time with your family. But this arrangement also cost freelancers plenty. Working from home means setting up a suitable workspace at your home, buying your own office supplies and subscribing to high-speed internet services to be able to do your job and stay in touch with your clients. You will also be solely responsible for paying your own taxes. This is one of those important things you need to get right every single time because you don’t want to end up with an audit by the IRS.

 

The Basics

Freelancers are classified by the IRS as an independent contractor. This means that you are taxed on your net income as a self-employed individual. Your net income is determined by your gross receipts less all business expenses that you can deduct.

 

The IRS allows independent contractors deduct certain business-related costs to offset their expenses. According to the agency’s guidelines on Deducting Business Expenses, “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.” Here are some good examples of what qualifies as a business expense:

 

  1. Home Office

All freelancers need a dedicated space in their home where for business purposes. Any part of the house will do (i.e. the attic or the cupboard under the stairs) as long as you can identify that area as your home office. As a general rule, you can deduct 10% of rent, utilities, and property taxes.

 

  1. Office Supplies

Anything that is considered as office supplies such as printer paper, envelopes, post-it papers, and staples are deductible. A coffee maker doesn’t count as an office supply.

 

  1. Equipments

If you are using a smartphone and a laptop or a desktop computer solely for business purposes, then these can count as a deductible.

 

  1. Training and Education

This also counts as a deductible provided that the training you are going to take is necessary to run or for the growth of your business.

 

  1. Professional Services

Anything you spend on professional services such as payment for that web developer who updated your website or for a blogger who writes articles for you.

 

Accomplished and Compliant

 

 

If you are just starting out as a freelancer and have never filed for tax returns for yourself, it is best to hire the services of a tax professional or a Certified Public Accountant to ensure that you are fully compliant and nothing is amiss in your tax returns. As mentioned earlier, errors and discrepancies may lead to an audit of the IRS and may cause you to incur a tax debt without you even knowing it. These professionals can also offer you the best tax advice and enlighten you more with the specifics on taxes for freelancers.

Should you incur a tax debt due to a filing error or disparity on your records, keep in mind that you should never deal with your tax debt and the IRS alone. Tax relief options are available to help ease the burden it causes among struggling taxpayers. Seek the help of a tax debt relief professional as they are highly-knowledgeable with regards to the complexity of tax laws. Dealing with tax debts requires both a thorough understanding of the law and a careful evaluation of your circumstance, so it  is best to let the experts find a resolution to tax-related concerns in order to come up with the best possible solution that fits your financial standing and situation.

 

To know more about CuraDebt Tax Relief, visit:

 

http://www.curadebt.com/taxpps/

http://www.facebook.com/curadebt

 

Understanding How Credit Card Works

The use of credit cards has been a part of our daily lives for nearly two decades now. It is a rare sight these days to see people making a purchase and paying in cash upfront. Credit cards give anyone who wields it an easy access to a line of credit, and if you maintain a good credit score, it is easier to apply for another one, with a higher line of credit.

There are many advantages in using credit cards. But why is it causing so much financial problem to millions of cardholders these days? Do cardholders really understand how these plastic thingamajigs work? Let’s  have a closer look at how credit cards really work and see what exactly is causing the problem.

Credit Card Balance and Credit Limit

Your credit card balance is the amount you have charged to your credit card on the purchases you have made but have yet to repay. Every time you use your credit card to make a purchase, the amount is added to your balance.

Each credit card has a certain limit, also known as the credit limit. This is the maximum amount of credit extended to cardholders by the issuers. Once the cardholder uses up all the credit in his or her plastic, that credit card is considered “maxed out” and cannot be used until a portion of that balance is paid off.

Finance Charges and Annual Percentage Rate

A finance charge is a fee that you pay to have a credit. This is set by your credit card’s annual percentage rate or APR, which is the annual rate charged for borrowing and is quoted as a percentage.

Minimum Payment

The minimum payment is the least amount cardholders need to pay on a monthly basis to keep their credit cards in good standing. Minimum payments are recalculated, depending on your card’s issuer. Some credit card issuers calculate the minimum payment amount as two or three percent of the outstanding credit card balance. There some issuers that calculate the minimum amount by taking a percentage of the outstanding balance at the end of the billing cycle and adding the monthly finance charges.

CuraDebt, one of the leading debt relief companies in the country, stresses the importance of paying off your credit card balances in full because if you keep using your credit card and continue paying the minimum monthly payment, you may find yourself in a situation where you just keep on paying that monthly payment without actually having any significant decrease in the balance. The payment goes towards the interest. With multiple credit cards to pay, getting caught in this cycle is the perfect setup for a financial disaster.  Do not forget that other fees may be added on top of your minimum payment depending on the transactions you make on your credit card other than a simple purchase.

Credit Card Fees

Aside from using your credit cards to make purchases, you can do other transactions using your plastic such as balance transfers and cash advances. Keep in mind that you will be charged a fee for these transactions. If you use your credit card overseas, then you will be charged with a foreign transaction fee. Late fees are charged when you pay past your monthly due date.

An Important Note

Do You Understand Your Credit Card Agreement?

Did you know that you can avoid paying finance charges if you pay your credit card balance in full? As stated earlier, finance charges are applied by the issuer to the cardholder’s bill for carrying a balance. No outstanding balance means no finance charges. Paying your credit card balance in full, or paying more than the minimum monthly payment is a great way to avoid having huge credit card debts in the future.

Before signing up for a credit card, it is best to read the agreement and have each point explained to you, like how the monthly minimums are calculated and make sure that all fees are outlined in the agreement. Do this even if you already have 5 credit cards under your name. Not all credit cards are created equal so it is best to get a better understanding of you are signing up for to avoid getting caught in those financial disasters simply because you failed to understand something that is in fine print in that credit card agreement that you inked.

Source:

Debt Settlement From A Debt Settlement Company