Tax season can be intimidating for any freelancer, but there are ways to make it less stressful by staying organized and planning.

Keep your business and personal finances separate, pay quarterly taxes, and get organized with good records and accounting software. These tips will help you maximize your tax savings as a freelancer.

Set Up a Business Bank Account

If you are a freelancer or small business owner, you can save money on your taxes by setting up a business bank account. These accounts help you separate your personal and business finances, streamline invoicing, and simplify tax filing.

There are several types of business accounts, including checking and savings accounts. The type of account you need primarily depends on how you plan to use it.

For example, a business checking account is the most common type of business account and is the one you will most likely use to receive payments. You can use this account to accept credit and debit card payments from customers, and many banks also offer additional perks to their business checking accounts.

However, you must choose a bank carefully before you open your account. Each bank has different fee structures and features; some are more expensive than others.

Some of these fees may be waived if you maintain a certain balance or meet other requirements. These minimum balance and transaction fees can vary widely from bank to bank, so it’s essential to research them before choosing your business bank account.

Most banks require you to deposit a certain amount when opening your account. This can be cash or a transfer from another bank account via electronic or wire transfer.

Track Your Expenses

As a freelancer based on guides for freelancer taxes, it is essential to track your expenses. This will help you stay organized and save time on tax preparation. It is also a great way to ensure you aren’t overpaying your taxes or missing out on deductions.

You can use a spreadsheet or accounting software to track your expenses. Most of these tools have a receipt capture feature that lets you snap a photo of your receipt and automatically submit it for reimbursement.

Once you’ve tracked your expenses, it is time to set up a budget. This will help you plan and avoid dipping into your savings in emergencies.

When setting your budget, consider all your expenses, including work-related and personal costs. This will give you a good idea of how much you must pay for the year.

Keeping track of your expenses can be daunting, but some tips will help you keep it simple.

First, divide your expenses into “needs” and “wants.” This will help you determine how much money you need to set aside for savings and emergencies.

Then, keep a separate bank account for business and personal expenses to track your income and expenses easily. This will allow you to build an emergency fund that will give you a cushion in case of job loss or financial setbacks.

Set Up a Business Bank Account

Deduct Business Travel Expenses

When deducting business travel expenses, the IRS sets specific rules. These include that the costs must be “ordinary and necessary” for the business or trade and must also be incurred while you’re away from your home overnight.

The key here is that the trip must be primarily related to your business rather than your personal life, which can be difficult if you’re traveling with your family. You can only deduct 100% of your travel expenses if you spend less than 25% of your total vacation days on pleasure activities (e.g., you fly to a conference on Tues and stay until Fri) or mix business with pleasure during your trip.

Another way to ensure that the business portion of your trip is deductible is to keep accurate records of your expenses. This will help you prove to the IRS that your travel expenses are a legitimate part of your business and should be approved when you file your tax return.

The new tax law has made it easier for businesses to deduct expenses, but it could be a more precise cut for individuals. Under the new law, there is no place on an individual tax return to deduct unreimbursed employee business expenses like travel. This means that many freelancers with significant business travel expenses managed help to claim these costs on their tax returns.

Deduct Half of Your Self-Employment Taxes

Whether self-employed or an employee, knowing how to maximize tax savings is essential. If you’re not careful, you could owe money at tax time.

Freelancers usually receive 1099-NEC forms that help them report income and pay taxes on it throughout the year. This income, though, is only sometimes enough to cover all your expenses.

It’s common for freelancers to find themselves owing a significant amount of self-employment taxes. This is because the self-employment tax rate is 15.3% of your net earnings, which is the sum of a 12.4% Social Security tax and 2.9% Medicare tax.

But the good news is that you can deduct half of this tax. Fortunately, the IRS considers this a business expense and allows you to remove this from your taxes.

The IRS also allows you to deduct the cost of health insurance premiums as a business expense. However, switching to a high-deductible plan is best if you can afford one.

Aside from deducting these expenses, there are other ways you can reduce your total taxable income as a freelancer. The most effective way is to use a variety of deductions, but you’ll need to understand the rules and limitations of each hypothesis.

Getting tax advice from a financial professional can help you navigate these deductions and maximize your tax savings as a freelancer. By keeping track of your income and expenses and taking advantage of tax breaks, you’ll reduce your overall tax bill and be able to focus on growing your business without worrying about how much taxes will cost.