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Freelancing and Taxes: 5 Things I Learned When I Filed Taxes This Year That Can Help YOU Earn More Next Year

Usually, like most, I hate filing taxes. But, this year was different. Why? Because I learned a few things. Following is what they are and how they can help you earn more next year if you freelance (or want to start freelancing).

1. I Made More Money: Last year, I made more money than I thought. I track my earnings daily (I have a chart that I update regularly so that I can always have a snapshot in front of me of what my earnings look like).

So, even though I had a very good idea of what I earned, it was enlightening seeing the final number in front of me.

How this can help you earn more: Tracking what you’re making on a regular basis – eg, daily, weekly, monthly – keeps you motivated to do those daily “boring, staid” tasks, like marketing, that bring in the dough.

Usually, I can look back at my earnings and see a direct correlation between my earnings and something I have/haven’t done. For example, I’m an avid article marketer and newsletter publisher. If my earnings are off by a few hundred dollars in one week, usually it can be tracked to missing a week or two of writing and distributing new content.

See what I mean?

freelancing-and-taxes

2. My Income Streams are Diversified: I have three primary income streams. They are selling ebooks, affiliate marketing and freelance writing projects from clients. All three of them are just about where I want them to be, ie, ebook sales account for more than half my earnings, affiliate marketing brings in the second most money and freelance writing projects (that I directly touch) fills the third slot.

Other income streams include freelance / SEO writing e-classes and Google minisite income.

I made a plan to diversify my income streams back in late 2009/early 2010; specifically, I wanted to transition into a primarily managerial role at my SEO writing company and focus more on writing and selling ebooks online. This paid off.

Seeing the earnings from each stream motivates me to make a plan to increase earnings.

How this can help you earn more: Ask yourself where you want to be in a year, two year, three years, etc. as a freelancer. Then, make a plan to get there – and stick to it. While it’s not going to be easy, it’s satisfying at the end of the year (or at tax time) to look at your income and see that you made progress toward your goal(s).

3. A Tough Economy Is Good for a Freelance Business: The worldwide economy hasn’t been in great shape for a few years now; it’s been particularly bad in the U.S. with unemployment fluctuating between 8% and 10%, which is considered high. And,  some regional economies have experienced unemployment higher than 10%, ie:

Nevada continued to record the highest unemployment rate among the states, 12.3 percent in February. Rhode Island and California posted the next highest rates, 11.0 and 10.9 percent, respectively. [Source: U.S. Department of Labor]

But, my earnings were significantly higher last year than the year before. This shows that a freelance business can thrive in almost any economy.

How this can help you earn more: There is no perfect time to quit your job to start a freelance business. The “perfect time” is when you’re ready to take the plunge. So, prepare – and then get started.

4. Organization Is Key: It took me forever this year to comb through the financial data of my freelance business and organize it. While I took joy in the fact that it showed me that my business is growing, it also means that old systems have to be replaced with new ones – particularly when it comes to getting financially organized.

One freelancer who read a recent freelancing and taxes post here (see comments section) suggested using Outright, which I’m going to look into.

How this can help you earn more: Don’t be afraid to make change in your freelance business. Growth requires it, so don’t hold yourself back by holding onto old systems that no longer work. I’m soooo guilty of this, but am quickly learning that it pays (literally!) to be less rigid in this area.

5. I “Gladly” Paid More in Taxes: I earned more last year, so I paid more in taxes. While I’m never happy about writing Uncle Sam a big ole fat check (I almost always owe), this year I didn’t mind so much. It was the second biggest check I’d ever had to write to pay taxes, but it underscored the fact that I had made more money.

How this can help you earn more: The way I plan for taxes is to set aside a certain amount from each payment I receive – whether it’s from ebook sales, or a client project, or affiliate commissions.

I have an account I set up just for taxes, and I deposit a certain amount of all earnings into this account weekly. This way, I never have to worry about having enough set aside to pay taxes. Part of the reason I wasn’t peeved about owing more is that I had the money.

I’ve been caught with my “tax bloomers” down before, and let me tell you, it ain’t pretty! One year I screwed up and owed more than $17K in taxes. It took me a few years to pay this off, which taught me a huge lesson. You never want to owe Uncle Sam – ever!

As always, here’s hoping these insights help you in your freelance business.

Yuwanda

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coverP.S.: Get the ebook that pushed my freelance writing career to the next level – allowing me to travel and live abroad, get out of debt and really “live the freelance life.” One freelancer wrote:

Hi Yuwanda,

Just wanted to say thank you – as a result of the advice in your SEO writing e-book, I got my first order within 12 hours of sending out my first batch of 10 marketing emails.

P.P.S.: Want to start a successful career where you have the mobility to live and work where you please? Visit our freelance writing bookstore for a ton of opportunities (freelance writing and internet marketing) to get you started.

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