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Looking for closed captioning or a transcript? Watch the episode on YouTube!

A Sneak Peek at the Episode

[2:06] Managing finances can be intimidating for freelancers, but it’s important to face your fears and start understanding the numbers!

[3:25] If you have a bookkeeper, Crystalynn recommends having a sit-down meeting with them at least once a month to go over your numbers.

[4:20] If you are currently managing your finances on your own, it’s a good idea to find a QuickBooks expert to set you up and teach you how to properly manage your books.

[6:02] Crystalynn recommends five reports to look at, including the accounts receivable aging report.

[7:47] Crystalynn advises keeping a separate business account, even if you’re using your personal account to fund things initially.

[12:35] Investing in accounting software has many benefits and can help you to keep on top of business expenses more easily.

[16:10] Scheduling regular time to review your transactions is a great way to stay organized when it comes to your business’ finances.

[19:51] Finding ways to reward yourself after completing financial tasks can make them a lot more palatable!

[21:43] Waiting until January or February to compile 12 months worth of information is very stressful. Managing your finances on a monthly basis makes the process a whole lot easier.

[24:27] Bookkeepers tend to do all of the day-to-day work like invoicing, recording, and categorizing of the numbers, whereas an accountant reviews and analyzes the financial statements to help give some insight into what the numbers say about the business.

[27:58] Accountants can also support with tax planning and discussing any changes to your legal entity.

[31:45] Try to use as little cash as possible when you’re purchasing items for your business or paying for expenses. It’s better to use something that’s going to have a record.

Must-Hear Takeaways

” I think a lot of people don’t realize that while your Excel spreadsheet is great, having an accounting software allows you to go paperless and automate things such as uploading your receipts. So I would just say while it does cost you money to purchase the software, it’s worth it because there are so many benefits. I would say another benefit would be connecting all of your bank accounts.” – Crystalynn

“As soon as you can afford to pay someone, a professional, I would say do it. But I still want the business owners out there to realize just because you hired someone to manage your books, that doesn’t mean you have a hands-off approach. Absolutely not. You still need to understand what that person is doing.” – Crystalynn

“There are just some things that we don’t necessarily feel like doing or maybe even things that intimidate us a little bit, especially as it can be when it comes to numbers, but that’s still something you have to do. And so we have to figure out a way to make ourselves do it and maybe even make it more palatable for ourselves. – Nicki

“Try to use as little cash as possible when you’re purchasing items for your business or paying for expenses. Use something that’s going to have a record. So use your credit card or use your debit card, or write a check if you need to do that.” – Crystalynn

Mentioned on this Episode

• Listen to her podcast: https://www.crystalynnshelton.com/podcasts
• Website: https://www.crystalynnshelton.com/
• Facebook: https://www.facebook.com/crystalynn.shelton.5/ 
• LinkedIn: https://www.linkedin.com/in/crystalynn-shelton-cpa-09436995/ 
• Instagram: @crystalynnshelton

Related Links

• Set Your Copywriting Business Up for Financial Success
• Opening a Business Bank Account as a Copywriter
• Accounting Tips for New Copywriters
• Ep. 112: Want to Earn Six Figures as a Copywriter? Get Your Finances in Order

Tell us what you love about the podcast and what you hope to hear next! When you do, you can get access to an exclusive bonus recording featuring five wildly successful entrepreneurs who share what they do (and don’t!) look for when hiring copywriters. You do not want to miss it! 

Get all the details on how to get your recording here »

About the Build Your Business Podcast

Ready to turn your love of writing into a successful copywriting career?

Join professional copywriters Nicki Krawczyk and Kate Sitarz to get the tips, tools, and training to help you become a copywriter and build a thriving business of your own. Nicki and Kate have 20+ and 10+ years of experience, respectively, writing copy for multi-billion-dollar companies, solopreneurs, and every size business in between.

Whether you want to land an on-staff job, freelance full-time and work from wherever you want, or make extra money with a side hustle, the best place to start learning is right here.

See Previous Episode

Ep. 145: Catchy Hook or Clickbait? How to Tell the Difference

The post Episode 146: Face Your Freelance Finances Fears – with Crystalynn Shelton (CPA) appeared first on Filthy Rich Writer.

As a copywriter, there’s lots of information we need to stay on top of. Some of that we can get by asking clients or fellow copywriters. But a lot of that information? We can find it ourselves.

Just like your time is valuable, so is your clients’ time. You certainly want to reach out when you can’t find information that you need to move forward on a project.

But you also want to do your due diligence in finding as much information as possible before asking your clients for it, particularly if the question isn’t related to internal company knowledge.

There is so much information in the public domain and there are several sites you’ll want to bookmark so you have them handy if you need them. Create a folder for “Copywriting Resources” or, if you start to have too many copywriting resources, subfolders that get specific: taxes, Facebook/Meta ad specs (not to be confused with spec ads!), Google ad specs, etc.

Getting organized now will set you up for success later! Here are a few sites worth bookmarking.

Facebook/Meta Ads Library

Search any company name in the Facebook/Meta Ads Library to find out what ads they’re currently running. This can help you get inspiration by seeing what other brands across an array of industries are doing and see what your client’s competitors are doing.

View details on a specific ad to see amount the company spent, the number of impressions, and who was shown the ad, and where viewers were located.

Bookmark this site:

• Facebook – Ads Library

Character Counts

When you’re writing ads, you’ll sometimes need to adhere to specific character counts. This is especially true on social media and search ads where not adhering to character counts means your ad either won’t run or text may be cut off, making for a message that doesn’t read as you intended.

Bookmark these sites:

• Google – Search ad specs (note: some clients may refer to these as “text ads”)
• Google – Responsive search ads
• Facebook – Ads Guide (note: make sure you choose the right type of ad—image, video, carousel, or collection, as well as the “ad placement” to see the given specs)
• LinkedIn – Best practices (as with Facebook, make sure you’re choosing the right type of ad).
• Twitter – Campaign types
• Snapchat – Ad formats

Ad Rules

With copywriting, you don’t necessarily have to play by the rules when it comes to things like punctuation and grammar (especially in places like a headline), but you do need to play by the rules when it comes to advertising policies.

While you don’t need to memorize the rules, it’s handy to review policies if you’re working on a project for a client that involves one of these platforms.

Bookmark these sites:

• Google – Ad Policies
• Facebook – Ad Policies
• LinkedIn – Ad Policies
• Twitter/X – Ad Policies
• Snapchat – Ad Policies

Grammar

You do not need to be a grammar expert to be a successful copywriter. That said, the best copywriters always strive to deliver clean copy. If you have a grammar question, Grammar Girl is the go-to. Use the search function to find answers to your specific question.

Taxes

If you’re planning on freelancing (a.k.a. being self-employed), you’ll want to bookmark the IRS self-employment tax page, so come tax season you don’t have that deer-in-headlights look of, “what do I do again?”

Publication 505 is another handy resource for figuring out how to pay estimated taxes. Rules can change slightly year to year, so you’ll want to make sure you brush up (or, better yet, get your professional tax accountant to stay on top of it for you).

And, when you’re self-employed, you have the bonus of being able to contribute to a retirement plan as the employer and the employee, which can come with some major tax benefits. You’ll want to read up on the rules and, again, talk with your accountant if you’re unsure. We can’t say it enough: We are not tax preparation experts, accountants, or lawyers, so be sure to always consult the pros with any questions.

Bookmark these sites:

• IRS – Self-employment tax
• IRS – Publication 505 – Tax Withholding and Estimated Tax
• IRS – Calculating retirement plan contribution and deduction (self employed)
• IRS – Tax Withholding Estimator (Note: When you use the calculator, step 4 will ask you about jobs where federal taxes are regularly withheld. Those who are 100% freelance will want to select “no,” or “0” for yourself if your spouse has a W-2 job. Step 5 allows you to check “Earn net income from self-employment.”)

And, of course, it’s worth bookmarking the Filthy Rich Writer site in case you have a copy-related question you need to search.

Your Turn

Do you have any go-to websites that we missed? Share them in the comments!

The post Websites Copywriters Need to Bookmark appeared first on Filthy Rich Writer.

Many states in the U.S. collect sales tax. Generally, laws allow businesses to add this tax on to whatever good or service they are selling.

But, as a copywriter, do you need to collect sales tax?

Like many things when starting out as a copywriter, this one can be easy to overthink and worry about. However, it’s an easy one to solve.

What Is Sales Tax?

Sales tax is a pass-through tax, which means the tax passes through onto the customer during a transaction.

Okay, so then who pays sales tax? And who has to collect sales tax? Customers, not businesses, pay sales tax. However, business owners must collect, deposit, and report the sales tax.

Your State Determines Your Sales Tax

First, whether you need to collect sales tax depends on your state. Forty-five states and Washington, DC have some type of state sales tax. Some states even have different sales tax rates or rules for local taxes or online sales. 

Second, if your state does have sales tax, you’ll want to dig into the laws. Many states do not require certain categories of businesses to collect sales tax.

Whether or not you need to collect it will depend on what you’re selling (copywriting services), your business location, and the location of your clients.

As of this writing, there are five states that do not have a statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. The others, plus Washington, DC, do have laws around sales tax.

Hawaii, South Dakota, New Mexico, and West Virginia tax most services, though there are a few services that are exempt.

Regardless of where you live, you’ll want to look into local laws and make sure you’re complying.

Where to Get More Information

The Federation of Tax Administrators has links to every state’s Department of Revenue so you can determine what, if anything, you need to do.

And, if you do need to pay sales tax, build it in your rates. Check with your accountant if you need to have it as its own line item or not.

Note: We are not legal experts or tax preparation professionals, so always consult an accountant, tax prep professional, or attorney if you have concerns. This information is aimed at copywriters in the United States. Copywriters in other locations may find this information useful for determining what questions they need to ask and answer based on their country, region, or city.

Read More: #1 Freelance Tax Mistake

What’s the #1 mistake you can make with your taxes as a freelancer? We have the answer and the solution here >>

Your Turn

Do you have to pay sales tax where you live? What are your tips?

The post Should Copywriters Collect Sales Tax? appeared first on Filthy Rich Writer.

If paying taxes is what’s holding you back from freelancing, there’s some good news: All the “what if’s” and worst-case scenarios you’re thinking are all solvable (and probably not as bad as you think). 

When you’re working on-staff, your company takes out money from your taxes from your paycheck. But when you’re freelancing and often when you’re contracting, your client is not taking out money for taxes. You get the full amount, meaning that setting aside money for taxes is up to you. 

Whenever you’re making money outside of the standard “working for a company on-staff” model, you must pay income tax to the federal government and often the state government (depending on where you live) and you also have to pay self-employment tax. 

And if you’ve been freelancing for a while, it’s always good to make sure you’re correctly handling your finances. Even if you work with a tax professional, it’s good to know where money is going and why.

Now, first, let me preface all of this by saying that I am not a tax or financial professional. I can tell you what I do, but I strongly recommend you consult with a licensed tax preparation professional.

So, take a deep breath, put on your CEO hat, and let’s make sure you’re not making guesses with anything related to your bottom line. The crux of all of this is that if you’re making any kind of freelance income, you need to be saving some of it for taxes.

Reporting Income as a Freelancer

There’s a common myth among freelancers that if you make under $600 with a client you don’t have to pay taxes. This is 100% false.

If you make under $600 with a client, they are not obligated to send you a 1099-MISC form. And even the clients that should send you a 1099 may not send one. It’s your responsibility to track your freelance income.

If you make $400 (net earnings) you have to file taxes for self-employment income. Even if Client A paid you $300 for a project and Client B paid you $500, you need to report all that just as you would your clients who send you 1099s. Essentially: you need to include all income earned from your freelance business, including payments under $600.

That way if you get audited, the deposits from Client A and Client B aren’t questioned—and you don’t end up having to pay interest and penalties.

Calculating Quarterly Tax Payments

As a freelancer, you should start making quarterly estimated tax payments if you expect to owe more than $1,000 in a year. 

If you make a lot of freelance income, you may have to switch over to paying quarterly taxes. In total and complete honesty, I’m not at all sure what that threshold is; my accountant switches me over as needed. (Consult a tax professional!)

Again, as a freelancer, no taxes are withheld from our payments as they are with an employer. When you work in an office, your employer is already taking out money for Social Security and Medicare (you may see it on paychecks as FICA, for the Federal Insurance Contributions Act). 

As freelancers making $400 or more, we owe self-employment tax, which is essentially that money that is normally withheld automatically for employees. 

Since we are the employer and the employee, we are paying both our half and the half the employer normally pays.

Before you think, “Wait! Doesn’t that mean I pay more?” we have more opportunities to reduce our taxable income (see below). For the most part, we’re simply paying money a different way (quarterly). 

As the IRS says, we could pay all our estimate payments upfront at the beginning of the year, but they give us the option to pay it quarterly to make it easier. Besides, who wants to pay thousands of dollars to kick off the year?

Use Form 1040-ES to calculate what you should be paying. (Again, a tax professional can also help.)

As long as you’re making payments, paying quarterly taxes as a freelancer will be much better than the surprise of suddenly paying an entire year’s worth of taxes (and any penalties for not paying throughout the year).

Making Quarterly Tax Payments

The dates for payments, oddly, don’t follow a true quarterly schedule. For example, Q2 payment period is April 1–May 31 with the payment due June 15. Click here for the IRS’s handy chart of payment due dates (and bookmark it!).

We strongly recommend adding them to your calendar with a reminder a couple of weeks before to make sure you’re ready to pay. 

Setting Aside Money for Quarterly Tax Payments

We recommend setting aside money in a separate account specifically for paying taxes. There’s nothing worse than being super excited about earning $5,000 from a client project, spending it all, and then having to scramble to pay taxes.

How much you put aside is up to you; we recommend you set aside at least 25% (and even up to 40%!) in a separate savings account. Don’t put this money in your checking account or your regular savings account; you’ll spend it and then you’ll be in deep trouble come April 15th.

You can pay by check. Once the IRS recognizes you need to make quarterly payments, you’ll start receiving pay slips and envelopes for each quarter in the mail. You can also pay from your bank account or debit or credit card, but there is a small fee for the latter.

While there are penalties for underpaying, the IRS notes taxpayers can avoid this if:

• You owe less than $1,000 in tax after subtracting your withholding and refundable credits
• Or if you “paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.”

So, if you paid taxes on 90% of your income in a year, you should avoid the penalty. If you start earning more than you estimated, you can make up payments. Alternatively, if you overpay in the first quarter, you can adjust during your second quarter, and so on. The key is to never get behind on payments. 

Reducing Your Taxable Income

Just because you’re paying quarterly taxes doesn’t mean you’re exempt from filing annual taxes like everyone else. In addition to paying quarterly taxes, you’ll file your annual income tax return before April 15 (Semi-fun fact: Tax Day is April 17 when April 15 lands on a Sunday and April 18 if April 15 lands on a Friday or Saturday).

If you overpaid on your quarterly taxes, filing your annual tax return will allow you to get that money back.

There are a ton of ways to reduce your taxable income as a freelancer. The IRS also explains expenses you can deduct (note: you’ll want to check deductions based on your business structure).

Remember that employer portion of your self-employment tax? You can deduct that when figuring out your adjusted gross income when filing your annual return.

Saving for retirement, whether via 401(k) or an IRA are other potential ways to reduce your taxable income.

401(K)

When you start making a great income as a freelancer and do not have any employees, another perk is being able to open a solo 401(k) retirement plan. You can contribute as the employer and the employee, allowing you to significantly reduce your taxable income, while boosting your retirement savings.

There are annual limits for employee contributions ($22,500 for 2023, which you file in 2024, or $30,000 if you’re 50 or older). Your employer contribution takes a bit more math to figure out. For self-employed individuals, it is “net earnings from self-employment after deducting both one-half of your self-employment tax and contributions for yourself.”

If you’re copywriting as a side hustle, you can only make contributions based on your freelance income. Any contributions you’re making as an employee of another company [for example, you freelance in addition to working a full-time job where you have a 401(K) count toward your employee contribution total. So, if you contribute $15,000 to your 401(K) as part of your full-time job, then you can’t contribute more than $5,500 as the employee of your freelance business.

IRA

Another option is to contribute to an individual retirement account (IRA). There are two types of IRAs: Traditional and Roth.

Roth IRA: Your contribution to a Roth IRA depends on how much you earn. For 2023 (filing in 2024), you can contribute if your modified adjusted gross income (your income minus certain allowable deductions) is less than $138,000 (or $218,000 if you’re married and filing taxes jointly). 

The perk of contributing to a Roth IRA is that the money is not taxed when you start withdrawing in retirement. You cannot deduct contributions to a Roth IRA, but you can put money iinto your Roth IRA as long as you live. A Roth IRA is an IRA that is subject to the rules that apply to a traditional IRA. 

Traditional IRA: Anyone can contribute to a traditional IRA regardless earnings. A traditional IRA is a way to save for retirement that gives you tax advantages.

Contributions to a traditional IRA may be partially or fully deductible. In general, earnings and gains are not taxed until you take a withdrawal. Traditional IRAs assume you’re making more money now than you will be in retirement, so you’ll likely be taxed at a lower rate when you begin withdrawing money in retirement.

This may all sound complicated so keep these two resources in mind: Finding a certified tax professional who works with freelancers is invaluable. You can also find useful information from the IRS.

Your Turn!

What are your best tips and tricks for surviving tax season? Let us know in the comments below!

Note: We are not legal experts or tax preparation professionals, so always consult an accountant, tax prep professional, or attorney if you have concerns. This information is aimed at freelancers in the United States. Freelancers in other locations may find this information useful for determining what questions they need to ask and answer based on their city, country, or region.

The post Paying Freelance Writer Taxes in 2024 appeared first on Filthy Rich Writer.

Note: We are not legal experts or tax preparation professionals, so always consult an accountant, tax prep professional, or attorney if you have concerns. This information is aimed at copywriters in the United States. Copywriters in other locations may find this information useful for determining what questions they need to ask and answer based on their city, country, or region.

As a freelancer, if you’re invoicing a client for more than $600 worth of work, they’ll likely ask you to fill out a W-9 form. That’s a good thing!

Filling out a W-9 form is very common and, if anything, should make you feel good that the business you’re working with is following the rules.

It means they’re already thinking ahead so they are prepared to send you a 1099-MISC form come tax time (similar to the W-2 form you get from a full-time employer). 

There’s not a ton of information needed on a W-9, but when filling it out for the first time, some freelancers panic that they have to provide their Social Security number.

The vast majority of clients want to stay in business and are not going to use your Social Security number in a malicious way. They’re simply using it to file their own taxes appropriately.

That said, if you’re uncomfortable there is an alternative. You can, regardless of business structure, apply for a free employer identification number, or EIN.

Yes, that applies to sole proprietors. You do not need to be an LLC.

Click here for more information on getting an EIN from the IRS »

Certain types of business structures will need to apply for an EIN. The IRS makes it easy to determine whether you need one (or if it’s optional) with a yes/no test, found here. If you change your business structure and already have an EIN, you’ll need to apply for a new number. Click here to see when sole proprietors (and other business structures) need to obtain a new EIN.

When filling out your W-9, you can opt to use your EIN instead of your Social Security number (but you can still opt to use your Social Security number even if you get an EIN—the IRS is good at finding the money you owe).

The rest of the W-9 is pretty straightforward, though you’ll want to pay attention to line 2 based on how you name your business. If you registered a business name, you will want to fill out line 2. If clients will pay you using your legal name (even if your URL is different), you can skip line 2.

Pro tip: if you know you’re billing more than $600 worth of work to your clients, then send them a W-9 with your invoice. It shows you’re being proactive and is a nice reminder to your client that they should be sending you a 1099 come tax season (they may not send one, but you should still report that income).

No information besides the date will likely change each time you give it to a client. You can download the form from the IRS website.

You may also find clients who have you fill out a W-4 (the form you fill out when you’re an employee of a company) instead of a W-9. This all depends on how they’re classifying you.

If you fill out a W-4, you’re considered an employee.

Even if you’re working on a three-month project, they may consider you an employee and have you fill out a W-4. Depending on federal, state, and local laws, they may also need to offer certain benefits because you are an employee.

Why is this? Well, if they’re telling you when to come into the office (or what hours to work remote), providing you a computer to work from, among other distinctions, you may fall into the employee versus freelancer or contractor bucket.

Click here for more information on how the IRS distinguishes employees from contractors »

You can always ask your client why they are classifying you one way or another.

But no matter what, don’t panic when faced with a form. If you want additional understanding on tax forms, look to the IRS website or ask a tax professional or attorney for the non-legal-jargon version.

Your turn! Did you decide to get an EIN and did you find it easy? Share your experience in the comments below!

The post Getting an EIN and Filling Out a W-9 appeared first on Filthy Rich Writer.

TUNE IN: Spotify | Apple Podcasts | Stitcher

Looking for closed captioning or a transcript? Check out the episode on YouTube!

A Sneak Peek at the Episode

[1:50] Rachel explains the difference between an accountant and bookkeeper and when someone would want to work with either one. Accountant is the umbrella term and within that there are different specialities, like tax preparation, audit, and bookkeeping.

[4:03] What’s the worse case for freelancers paying taxes all wrong? The worse case is if you don’t file your taxes and have to pay years and years of back taxes and penalties. Making a good faith effort is what’s most important. Estimated taxes are just that: estimates.

[7:20] Set aside somewhere between 20 and 40 percent in a separate account from each paycheck so you’re not surprised with a huge tax bill. How much you set aside depends on your tax rate. Rachel explains a few major things that can impact your tax rate.

[10:09] Rachel’s #1 recommendation is to set up a separate bank account and all money related to that. She also clarifies how your business structure may impact that. For freelance work, she recommends using a spreadsheet to track your income and explains why bookkeeping software is so much more than most people need.

[15:12] Scenarios where you may want to hire a bookkeeper include if it’s a pain point, if you start selling products where you have to deal with sales tax, if you hire employees, and other more complicated scenarios. And while it may be tempting to hire a virtual assistant because they’re inexpensive, you’re going to get someone who has no idea what they’re doing.

[17:40] Make a list of the things you least enjoy in your business and prioritize them in order of what you want to get off your plate. And when you make enough to get them off your plate, get them off your plate.

[21:00] Rachel digs into common deductions that freelancers miss, as well as items that freelancers try to deduct that are crossover between personal and business. She also notes how deductions like mileage are not ones you can guess at because they’re a huge flag for auditors. Freelancers often miss a lot of deductions because they don’t have a separate business account and miss expenses that are in their personal accounts.

[26:29] Schedule out time once or twice a month to keep up with your income and expenses.

Mentioned on This Episode

• Tax Preparation Myths (from Masterpiece Bookkeeping)

Related Links

• How to Avoid a Major Tax Slap
• Tax Tips for Freelancers
• The Best (and Cheapest) Way to Track Freelance Income
• Tax Deductions for Copywriters

Tell us what you love about the podcast and what you hope to hear next! When you do, you can get access to an exclusive bonus recording featuring five wildly successful entrepreneurs who share what they do (and don’t!) look for when hiring copywriters. You do not want to miss it! 

Get all the details on how to get your recording here »

About the Build Your Business Podcast

Ready to turn your love of writing into a successful copywriting career?

Join professional copywriters Nicki Krawczyk and Kate Sitarz to get the tips, tools, and training to help you become a copywriter and build a thriving business of your own. Nicki and Kate have 20+ and 10+ years of experience, respectively, writing copy for multi-billion-dollar companies, solopreneurs, and every size business in between.

Whether you want to land an on-staff job, freelance full-time and work from wherever you want, or make extra money with a side hustle, the best place to start learning is right here.

See Previous Episode

Ep 10: Your Ideal Clients Want You to Pitch Them

The post Ep. 11: Tax and Bookkeeping Tips for Freelance Copywriters appeared first on Filthy Rich Writer.

Freelancing has taken the world by storm. Bringing with it flexible work schedules and a healthier work-life balance, it’s no surprise that 73 million Americans are doing some form of freelance work. In fact, 64% of Gen Z want to work for themselves, explaining that they want to chart their own future and have plenty of entrepreneurial traits.

But entering the freelance market requires more than just skills in and determination. You also have to think about your own finances on top of meeting deadlines. This administrative work can be tough for freelancers, especially copywriters, as it can be confusing without the proper training and experience. So, if this sounds like something you’re having trouble with too, we’ve come up with a list of everything freelance copywriters need to know about accounting.

Establish Billing Policies

Your freelancing contract should state your terms for payment, such as when you’ll be paid, how you’ll be paid, and what penalties you have for late payments. While some people advocate for payments upfront, clients are usually much more comfortable with paying after a project has been delivered and they’re happy with it. As long as they’re clear on your charges and your timeline, getting paid shouldn’t be a problem.

Taxes and Regulation

Remember that even though you’re a freelancer, the government can still tax your income. If your net profit is $400 or more, then you need to start filing. The self-employment tax rate in the U.S. is currently 15.3% of your first $132,900, where 12.4% is allocated to Social Security, with the remaining 2.9% going to Medicare. An additional 2.9% applies to any income beyond that limit. (And that’s in addition to your regular tax rates.)

In line with this, it is important to consider the tax deductibles you can take advantage of. For instance, if you work from your home office, you can deduct expenses related to home office use. Look up tax laws in your state to see if any additional municipal tax deductibles apply. (And if you’ve taken advantage of a professional discount at some point, it’s likely the item you bought is work-related and tax-deductible.)

Keep Your Income and Expenses In Order

Keep your business income and expenses organized at all times. This helps you with your tax bills and ensures that you can stick to a monthly budget. A simple Excel spreadsheet can help you get your numbers in order. Or opt for a software program like Mint or FreshBooks to help. Some applications even allow you take a picture of your receipts and organize them online. Come tax season, you simply have to send those pictures off to the IRS.

Keep Separate Accounts

It may seem easier to keep all of your money in one account, but this is a mistake. Minimally, have a separate account to set aside money for your taxes to help ensure you’ve got enough money when tax time comes.

Hire an Accountant

Sometimes, all the financial work that comes with freelancing can get overwhelming, especially if you’re freelancing on the side, or just starting out. The best way to ensure that you’re complying with all the necessary tax laws and regulations is to hire an accountant — which makes it the best (and first!) investment you should make. They also aren’t just there to help you with your taxes, as accountants can teach you how to handle your budget, save more money, and save you time and effort in handling your finances.

Staying on top of your accounting may not be your top priority, but it is a responsible part of doing business. Let an accountant handle it, or make sure you’re on top of all your transactions to keep up with the mandatory taxes. Just stay organized and know how to make your resources work for you!

About the Author: Freelance blogger and yoga teacher Reese Jones wants both amateur and veteran copywriters to know that it’s possible to take charge of their financial future. When she’s not scouring the news for the latest financial apps and software, she spends her free time tending to their backyard herb garden with her husband Tom or running the trails with their golden Labrador Ashley.

Your Turn

Do you have any accounting tips you could share with new copywriters? Tell us about them in the comments!

The post Accounting Tips for New Copywriters appeared first on Filthy Rich Writer.

First, a caveat: I am neither an attorney nor an accountant and none of my advice should be taken lieu of talking with a professional. Never let a blog post make your legal decisions for you. Also, all this information is based on U.S. law and law as of the date of publication. (Consult a professional!)

That said, this blog post is based on a few facts, my experience, and my advice based on these. Do with this what you will.

So, you say you want to start a copywriting business? Super. Let’s skip past all that learning copywriting, building your portfolio, and finding clients stuff and go right on ahead to your business’s legal entity.

S-Corporation vs. Sole Proprietor

This is where people tend to think, “Oh! I’m a business! In order to be a serious business, I’ve got to be a corporation.”

Here’s the good news. For the vast majority of us, it’s going to make the most sense and keep it simple. As soon as you start earning money by working for yourself, you automatically become a sole proprietor in the eyes of the government.

And, as such, by the way, you need to track that income and prepare to pay taxes on it. Part of what you’ll have to pay is “self-employment tax” that is, essentially, your payment into Medicare and Social Security. (When you work for a company, that’s already taken out of your paycheck before you get it.)

Self-employment tax is currently 15.3% and that’s on top of your other, regular income tax. The rate consists of two parts: 12.4% for Social Security (old-age, survivors, and disability insurance) and 2.9% for Medicare (healthcare insurance). And that can feel a little painful for some people, so they want to find a loophole.

It’s true that you can form an S-Corporation, pay yourself a salary that is less than the total amount of money you made, and pay only self-employment taxes on that salary amount—but it also has to be a reasonable salary.

If you made $100,000 and you’re trying to tell the government you’re taking a $25,000 salary, expect to be audited or, at the very least, penalized.

The fact is that there are so many other costs and headaches associated with forming a corporation, that It’s not going to be worth it for most of us to save a little bit on our self-employment tax. (The smarter thing to do is to maximize your business and personal deductions.)

Limited Liability Company

But what about liability? Don’t some people form corporations to limit their liability? As in, if you have a corporation and you get sued by a client or company, your personal assets are at risk.

Here’s the thing, though: There’s virtually no instance in which you would be liable for any kind of issue. When you write copy for a client, you are providing services to them and they publish or deliver the copy in whatever form (banner ad, email, webpage, etc.) it takes—which means any possible liability falls on them.

You would never be liable for the content of your copy because you are writing that copy for your client. Unless you write something you know to be untrue or plagiarize something (in which case you would be complicit—but you would never do that, right?), it’s not up to you to take on liability for your client’s project.

You don’t need to limit your liability by becoming a limited liability company (LLC) because you wouldn’t be liable to begin with.

Now, don’t think that defaulting to a sole proprietorship means everything is free and easy, though—you’re still a professional business. And that means that in addition to paying self-employment tax, you may also need to pay your taxes quarterly, instead of once a year on April 15th. (How do you know? Talk to an accountant!)

So, the good news? It’s very likely that you don’t need to bother going through the headaches and expenses of creating and maintaining a corporation. But don’t forget to do your due diligence and make sure you’re making the right decisions and saving the right amount for taxes for your sole proprietorship. Treat your business like a business and you’re on the road to success (and profits).

Watch More: How To Build Your Own Benefits

American workers leave an unprecedented number of vacation days on the table. So, as a freelancer, will you be able to take vacation? And what about healthcare?

In this episode of the Build Your Copywriting Business podcast, Nicki and Kate talk through benefits you may typically get at a full-time job, including healthcare, vacation time, and even perks like a snacks, and how you can build those benefits into your freelancing business.

Your Turn

What is the structure of your copywriting business? Let us know in the comments below!

The post Do You Need to Incorporate? appeared first on Filthy Rich Writer.

Taxes aren’t anyone’s favorite task—and we could probably include accountants in that group! But as a copywriting professional who likely takes on some amount of freelance work, you need to take your taxes seriously. Here we look at what kinds of deductions your copywriting career can net you.

Before we dig in any further, let us be clear: We are not tax preparation or accounting professionals. Before you use any of the following deductions, please contact a licensed tax preparation professional. While this information is aimed at U.S. residents, international copywriters can use this to help focus further research and/or ask questions of their own tax preparation expert.

Okay, now that that’s out of the way, there are deductions you’ll want to look into as a copywriter. Once you’ve figured out how much you’ve earned for the year, it’s time to think about how to offset some of the taxes you’ll pay on that. Deductions can reduce how much income you have to pay taxes on. For example, if you made $80,000 from copywriting but had $10,000 in business expenses, you’d be paying taxes on $70,000 versus $80,000.

And as business owners, that’s crucial to being able to reinvest in our businesses!

Here are a few tax deductions for copywriters you should look into.

Home Office Deductions

In 2017, the Tax Cuts and Jobs Act eliminated the home office deduction for employees. Meaning, if you were employed full-time by a company, you could no longer deduct your home office. However, self-employed individuals that use their home office as a primary place of business, the deduction still stands.

You can claim this deduction whether you own your home or rent. The key is you must have a space that is only used for business. Your child’s playroom that doubles as your office doesn’t count.

There are two ways to calculate the home office deduction. Most tax preparation software will walk you through it, but a tax professional can also guide you on the best option for you.

Simplified option: This is what it sounds like: simple. The square footage of your office space is multiplied by a prescribed rate.

Regular method: This requires a bit more math based on actual expenses (rent/mortgage, insurance, utilities, repairs, etc.). Generally, this is based on a percentage (the percentage of your home used for business compared to the rest of it).

Deductions for Office Supplies & Office Expenses

These two categories are very similar but treated ever-so-slightly differently. The good news is that there are plenty of items that fall under both.

Office supplies are typically things you use up. Think: paper, pens, paper clips, staples, stamps, notebooks, and tape.

Office expenses are things like:

• Software: Any programs you use to run or build your business (QuickBooks, SamCart for checkout pages, etc.) are deductible. (And don’t forget that if you’re used a professional discount for anything over the year, it’s likely for an item that is deductible.)
• Your portfolio site: The hosting costs, domain name costs, and any other costs associated with the maintenance of your online portfolio site (including the cost of hiring someone to build it should you choose to do so) are deductible.
• Computers and big-ticket equipment: Some higher-cost items are considered “business equipment.” For expensive items like these, you can choose to deduct them all at once or deduct the depreciation over a series of years. If it’s under $2,500, you can opt to deduct it all at once, which can help lower your taxable income in a really lucrative year!
• Home office furniture: When you buy a desk or chair or filing cabinet for your home office, you can deduct those, too. Like big-ticket technology, you may be able to opt for a deduction or depreciation if the furniture you purchased is pricey.
• Internet and cell phone: If you’re using Wi-Fi and/or your cellphone to conduct business (client calls, work, etc.), you may be able to deduct a percentage of your bills. (As with everything, talk with your account if you’re unsure of the best way to go about this.)

IRA or 401(K) Deductions

As a freelancer, you do have the ability to save for your own retirement. Your employer may not be offering a 401(K) match, but if you are a sole proprietor or an LLC with just one employee (which is taxed the same as a sole proprietor), then you can match your own 401(K) contributions. As a self-employed business owner, you are the employee AND the employer.

That means as the employee you can contribute up to $22,500 for 2023 tax year (filed in 2024). The amount is always a higher amount for those over age 50. When in doubt just google “401(K) contribution limit.” As the employer, you can contribute up to a percentage of your compensation. A tax pro or most tax software can help you work through the math.

For traditional IRAs, you may also be able to deduct your contribution. This depends whether or not you or your spouse (if you are married and filing jointly) have a retirement plan at work and your income exceeds certain levels. If you/your spouse do not have a retirement plan from an employer, then the full amount is deductible.

Listen to this podcast episode for more on building your own benefits >>

Deduct Your Advertising Costs

Did you dip your toe in Facebook or Google ads for your business this year? Or did you even take out an ad in the local town circular? The cost of advertising your business is deductible.

Professional Development Deductions

Did you take any courses to improve your business or copywriting skills? (Ahem, ahem.) You can deduct the cost of certain professional development training. (U.S. residents: Read more about educational tax deductions.)

Other professional development-related expenses include:

• Books: Purchased books that you read specifically to help you grow your business? They’re deductible. This includes books about copywriting (like Nicki’s own Copywriting Strategies) but other books that aren’t specifically about copywriting that are intended to help you grow as a business owner (and grow your business). Check out all our book recommendations right here >>
• Subscriptions: If you subscribe to Ad Age, Writer’s Digest, Entrepreneur, or other such periodicals to keep your writing and business skills sharp, you can deduct these subscriptions.

Deduct Legal and Professional Services

If you hired a lawyer to help you incorporate (generally not necessary for a copywriter, but still), an accountant to do your taxes, or another similar professional to help you with your business, you can deduct those costs.

Business Travel Deductions

If you’ve had to hop in your car to drive to meetings with clients, you can deduct the cost of that travel. Sure, you can figure out what you paid for gas for just those trips, but most people tend to just use standard mileage: You track the miles you drive for business and then multiply them by a certain amount to see how much you can deduct. Standard mileage for 2023 taxes (the taxes that you file in 2024) is 65.5 cents for every business mile driven. That may not seem like a lot, but if you’re driving a lot to get to client meetings (or driving daily to get to your contract gig), it can really add up!

You do need to keep track of all your expenses and hold on to receipts (physical or digital) in case of an audit. If you haven’t already started or developed a system for tracking your expenses, do so now!

Your Turn

Have you been tracking your deductions this year? Is there anything you’re surprised you can deduct? Let us know in the comments below!

The post Copywriter Taxes: Save With These Deductions in 2024 appeared first on Filthy Rich Writer.

If you’re moving from on-staff work to freelancing—or even just freelancing on nights and weekends—you’re in for a whole new world of taxation. Here’s what you need to know…

Today’s question comes from Meera V., who asks, “Are there any tax implications I should know about when I accept freelance work? Clients don’t withhold taxes, do they?”

This is a very astute question. Whenever you’re making money outside of the standard “working for a company on-staff” model, you have to pay taxes on that money.

When you’re working on-staff, your company takes out money from your taxes from your paycheck. But when you’re freelancing, and often when you’re contracting, your client is not taking out money for taxes. You get the full amount, meaning that setting aside money for taxes is up to you.

Now, first, let me preface all of this by saying that I am not a tax or financial professional. I can tell you what I do, but I strongly recommend you consult with a licensed tax preparation professional.

Okay, that said, let’s get down to it. The crux of all of this is that if you’re making any kind of freelance income, you need to be saving some of it for taxes.

When you make money outside of an on-staff job, you have to pay income tax (at least Federal and probably also State, depending on where you live) and you also have to pay self-employment tax. Neither of these is cheap.

For every payment that you get for a project, you should be setting aside 25%-40% in a separate savings account. Don’t put this money in your checking account or your regular savings account; you’ll spend it and then you’ll be in deep trouble come April 15th.

Personally, I like to set aside 50% of each check I get in because it helps me automatically set aside money. Once my taxes are paid, I can transfer the remainder into my personal savings account.

If you make a lot of freelance income, you may have to switch over to paying quarterly taxes. In total and complete honesty, I’m not at all sure what that threshold is; my accountant switches me over as needed. (Consult a tax professional!)

Another reason you should talk with a tax professional is that freelancers are eligible to claim all kinds of things as deductions, from commuting miles and your home office space, to advertising and professional development. Again, though, this gets complicated and trying to deduct things you shouldn’t is a great way to get in trouble with the IRS.

When you’re looking for an accountant, I’d strongly recommend finding one who has experience working with other freelancers and/or contractors. It’s even better if he/she has experience working with freelance/contract writers, since they might be able to suggest other deductions you haven’t even thought of.

Your turn! How do you remember to set aside tax money? Let us know in the comments below!

The post Copywriting Q&A: Planning for Taxes appeared first on Filthy Rich Writer.