Impact of January 16, 2019 IRS Announcement on Freelance Workershttps://www.irs.gov/newsroom/irs-waives-penalty-for-many-whose-tax-withholding-and-estimated-tax-payments-fell-short-in-2018
So helpful guys…Yesterday the IRS announced that it would temporarily lower the bar on the amount of necessary estimated tax payments to 85% for self-employed workers due to the 2018 tax changes. It didn’t lower anyone’s taxes; it just said if you pre-paid at least 85% of your taxes owed on the schedule, it would waive the penalties usually associated with not making your quarterly payments in full. Not a huge help, really, but at least they recognize just how hard it is to get close to the right amount of tax payments, with all the crazy variables. For you as a freelance worker, maybe in the gig economy or maybe in a more traditional working role, the challenge of estimating your annual income can be daunting. Most freelance workers struggle to know exactly how much they’re going to earn at any given moment. With multiple income sources and unsteady payments, the task of setting aside taxes can be daunting.
Here’s what you need to know about being a freelancer and managing your taxes:1. If you think you will make more than $1000 dollars of freelance/self-employed/gig economy work, you need to make estimated tax payments quarterly or risk penalties and fees. 2. If you can get in the disciplined habit of making these payments, it will remove a great deal of stress from your life come tax season. 3. You can make estimated payments based on your last year’s tax return or you can be more accurate using the earnings you are making now. (This second option is often better for freelancers, as their income fluctuates, and hopefully they’re earning more this year.) 4. The trick with making these payments is to save for taxes out of every payment you receive for freelance work, and then make the payments to the IRS every quarter on their published schedule.
Now there’s a better way!
If this all seems very daunting to you (as it does to most new self-employed people), we have great news for you. RoamHR is a mobile application that lets you create a secure Tax Savings Account that connects to your primary checking account where you receive payments. RoamHR automatically projects your taxes for you every time you get paid, and then moves the money into your Tax Savings Account. You can even set it up to pay your quarterly payments automatically.
Our goal is to give freelance workers the same experience with their taxes as W2 workers have, where tax payments are just managed – letting freelancers focus on the work that they want to do, and not on tax planning.