Tax and Insurance for Freelancers Ready to Quit Their 9-5
If you’re thinking about quitting your 9-5, you probably are looking for tax and insurance resources for freelancers. Not to mention help with financial planning. Am I right?
The benefits of owning your own business are abundant including:
- Being your own boss
- No cap on your salary
- Ability to make a lot of money
- Opportunity to pursue your passion for writing
- And more!
However, it’s hard to argue that you won’t be losing out on benefits offered by a corporate firm. Thankfully, though, there are plenty of financial planning and insurance resources for freelancers. To help you out, I’ve compiled a guide to help you, so you can still build your retirement, take care of accounting issues, and make sure your backside is covered with insurance.
Insurance Resources for Freelancers
Finding individual health insurance as a freelancer can seem like a huge bummer, but it doesn’t have to be.
What’s important is that you do get health insurance. Under the Affordable Care Act (Obamacare), everyone is required to get health insurance. If you don’t have health insurance you can pay a penalty of up to $2,085 for the year.
Here are some of the top insurance options for freelancers.
- Government Coverage
You can check to see if you qualify for government coverage through your state’s marketplace https://www.healthcare.gov/. Coverage benefits vary from state-to-state, but all the information you need is on that website.
In some instances under Obamacare, if you make less than about $45,000 as an individual (or $94,200 for a family of four), you may be eligible for a subsidy or tax credit towards your health plan.
- Private Health Insurance
There are several places to get private health insurance. The best option is to get a quote from a place like ehealthinsurance. You can enter your information and they will provide you with a list of plans and you can select which best suits your needs.
- Freelancer Union Insurance Agency
Your last option is the Freelancer’s Union Insurance. They specifically work with freelancers and will help you find an insurance plan that suits your needs.
Financial Planning Resources for Freelancers
When you start freelancing, it can be super tempting to forget all about planning for retirement. After all, it’s a lot easier to do when you set up an account, pre-taxed money gets automatically deducted from your paycheck, and you never have to even think about it.
As a freelance writer, one of the first things you should do is set up our own retirement savings plan. For example, you can set up a:
- Simplified Employee Pension (SEP)
- Roth IRA
The numbers vary a bit depending on the type of account you select, but for a 401K, for example, you can contribute up to $17,500 plus as much as 25% of your net earnings from self-employment up to $51,000. This is a great way to save for retirement and also reduce your taxable income. It just requires a little forethought before you get started and some discipline.
Remember, you should also look into purchasing life insurance and covering your assets.
Tax Resources for Freelancers
While we are on the subject of using restraint to put aside some money to plan for expenses, let’s talk about taxes.
When you work as a freelancer, most companies will require you to fill out a W-9 so they can send you a 1099 at the end of the year. I usually fill a w-9 out once and then save the form to my desktop, because most all of your clients will request this form from you.
If they do not ask you for this form, it doesn’t mean you get out of paying taxes. It just means they are probably a bit disorganized when it comes to paying taxes, and that you have to remember to report the income yourself. If you make more than $600 from a company, you will have to report that income to the IRS.
As a freelancer, you also get to report your deductions, which means you should keep track of your expenses. You can deduct any of the following things:
- Business travel
- Car expenses
- Contract labor
- Education expenses
- Fees and commissions
- Health insurance premiums
- Home office
- Insurance (other than health)
- Legal and professional services
- Office expenses
- Pension and profit-sharing plans
- Repairs and Maintenance
- Equipment (computer, software, etc.)
- Self-employment tax
- Unpaid invoices
To keep track of your expenses and income, it’s best to invest in a software like Quickbooks.
As far as filing for taxes, you can do it yourself with a software like TurboTax, but it’s almost always worth it to hire a CPA.
Just like you know the ins and outs of writing, a CPA knows the ins and outs of tax law. They can help you set up an LLC, guide you with regards to deductions, and speed up the whole process so it’s not a huge hassle.
And there you have it…all the tax and insurance resources for freelancers you need! Once you have these nitty gritty details sorted out, you’re ready to roll.