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It’s Groundhog Dog! Which means it’s February. Time for another freelance income report. But first, I want to share some tax tips for you since we just filed for 2106 and the process is still on my mind.
Filing Freelance Taxes
We filed using Turbo Tax Small Business, and after completing that process I realized I needed to tweak some of my processes.
A Better Income Tracker
I didn’t really start officially tracking my expense categories until part way through last year. So as we were working on tax stuff, I had a piece of paper, a pen, and a calculator out trying to tally up how much I spent on fees. And training. And supplies.
You know–all those expenses I shared in my reports throughout the year.
But this process was taking quite a while. So my husband quickly added a column to last year’s spreadsheet with a handy drop down list for me. I was able to categorize everything and with a little Excel magic, we quickly had the sums we needed.
Which started the conversation about my need for a new process.
I had my husband build me an entire new spreadsheet. He’s much better at Excel than I am, and I’m so thrilled with the result.
My spreadsheet now utilizes a general ledger format instead of a completely different sheet for each month. The spreadsheet automatically runs a report for me so I can keep track of each month’s data. (That makes these reports easier!). And I can see my annual P&L at a glance.
There’s also a column for expense categories now, so next year’s taxes will go more smoothly.
My Best Tax Tips
After filing taxes, and working through a new income tracker, I had some definite takeaways.
Don’t Put Off Paperwork
In today’s technologically driven world, you don’t usually have a shoe box full of physical receipts that needs your attention. But, you likely have digital records.
It can be tempting to put off sorting your business paperwork. But if you put it off, you’ll be facing a mountain of files to deal with. It’s much easier to just take a couple minutes at least once a week to sort through everything and update your income tracker.
Track Your Expenses by Category
When it’s time to actually file your taxes, you want everything ready to go. This includes your expenses.
I’ve learned it’s way easier to track your expenses as you go, assigning categories while you’re at it. So think about what categories your expenses are, and start assigning a category to each.
I use my Excel spreadsheet to tackle this. If you don’t feel like doing it yourself, there are plenty of other options out there. Here are a couple of options with solid reviews that I found:
Find something that works for you, and go for it! Just remember to update it frequently so you aren’t buried.
Know Your State’s Requirements
I live in a state without an income tax. But, I have to file a report each year on income earned in the state. If I ever make enough, I’ll have o pay business taxes.
Until then, I have to keep track of what income actually comes from Washington.
My requirements are probably different from yours. So do some research and know what your state needs. Build that requirement into your income tracker. That way you’ll be prepared at tax time.
Be Proactive in Saving for Taxes!
If you aren’t proactively saving money for taxes, you probably won’t have what you need when tax season rolls around.
So decide what portion of your income goes to taxes, and stick it straight into your business savings account. I automatically save 25%.
Don’t Spend Your Savings
As I learned this year, I need to actually save more than 25%. That’s so I have money for my expenses. If you transfer the remaining 75% to your personal account, you’ll wind up spending your tax savings to pay expenses.
Like I did last year. That’s a big oops!
So set aside money for savings AND expenses before spending any business money personally.
Make a Backup!
If you’re using an offline tracker for your income and expenses, make a backup. You never know when your computer is going to die or you’ll need records when you’re not home.
I moved my tracker to Dropbox, and can open it from anywhere. If you use a web based tracker, you’ll be all set too!
Now Onto My January Income Report
I’m excited to share that January topped the record books in my freelance business. It was my highest grossing month since launching back in the summer of 2015.
I took on a huge content editing project for a client. I’m content editing a grade 4 ELA curriculum, which really utilizes my previous background and education.
This project is expected to last through June of 2017, and payments are out about 30 days. I report my income as it’s received rather than as it’s earned, so the majority of the income for January was actually earned in December.
A Look at the Numbers
Total Income Received: $3,385.00
Here’s a breakdown:
65% of my income came from Content Editing.
10% of my income came from Virtual Assistant work.
25% of my income came from Freelance Writing.
I’m really seeing the importance of diversifying my income streams. That way your eggs aren’t all in the same basket.
I’m also realizing that my content editing gig will be a tough one to replace when it runs out. Which means I need to put some more thought and effort into growing my other streams of income.
Expenses for January
My expenses were much higher in January than normal.
I’m having a baby (today’s my due date, so I’m ready anytime!).
I wanted content on my blog while I took a bit of time off from writing for myself here.
Offering some paid guest posts seemed like a good way to bless other freelancers and get the content I wanted. So I sent out a call for pitches to my email subscribers. (If you haven’t gotten on my list yet, you should!)
I’ve never been on the receiving end of pitches before. That was an experience! And I got some fabulous content created out of the process.
So I’ll be sharing one guest post with you a week all throughout February.
Here’s the breakdown of my expenses for you:
$556.87 total expenses
That includes my guest posts, and:
- A new planner
- Image creation for my posts, and a new logo for my Maggie’s Milk site (check it out here!)
- Subscription to Microsoft 365 and Zoom
- Email services
- Renewing my teaching certificate
- Tax software
- PayPal Fees
I transferred 25% of my income directly to my business savings account for taxes next year. After realizing one of my mistakes last year was not saving enough, I also transferred 10% directly to my business checking account to use for expenses.
You know–so I’m not spending my tax savings!
Looking to February
I’m very thankful for the work that I have, and the income that comes with it! We’re working on paying off my student-loan debt–something we need to accomplish to continue the process of becoming missionaries to Missionary Acres.
But, I know that with a new baby coming any day, I can’t grow right now. February is going to be about maintaining for me.
I’ll continue doing my content editing. That’ll really help keep February income from being low.
I also expect more hours in my VA category as I help a client prepare for an upcoming online conference.
Writing will be lower for me this month. I’ve knocked out all of the client work I had scheduled. I should get another batch of shorter posts from one client about the middle of the month.
But otherwise, I’m putting the brakes on just a bit.
Once I’m recovered, I’ll slowly start increasing my pitching. That way I can hit March off and running.
Sounds like a plan to me!
Have you Filed Your Taxes Yet?
I’d love to hear any tax takeaways you learned in the process!