No one likes taxes. However, they are still something that we all have to do. As a freelance designer, there are a couple of extra considerations one has to make in terms of taxes. An article on Forbes.com titled “Freelancers, Here’s How to do Your Taxes” as well as two pages on the IRS’ site titled “Self-Employed Individuals Tax Center” & “Self-Employment Tax”, provide the answers to what this extra considerations might be.
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Having an Accountant
Although one could in theory do their own taxes, it is really best to have an accountant who will do it for you. They have the expertise and knowledge to help you and will ensure that your taxes are done right. They might even help you get more back or deduct more on your taxes. Hiring an accountant can cost anywhere from $90/hr to $300/hr.
Taxes
There are a couple different taxes that you have to pay as a freelance designer. The first one is income tax, which everyone has to pay. Income tax as its name suggests, is a tax on your annual income. This tax can range from 10% to 39% depending on your income. Because of the fact that there are many factors that go into what your income tax rate is, and because everyone has to do it, I do not feel that it is necessary to discuss the specifics of income tax.
The other tax that you must pay as a freelancer is the Self Employment tax. The Self Employment tax consists of both Social Security and Medicare. When you work for a company or firm, you only pay for half of this tax, while your .employer pays for the other half. As a freelancer, you are self-employed. Being self-employed, you need to pay the whole of Social Security and Medicare. As of 2014, the Self Employment tax was 15.3%. This rate consisted of 12.4% going to Social Security, and 2.9% going to Medicare.
What is it that is taxed one might ask? As of 2014, the first $117,000 of your combined wages, tips, and net earnings went to the Social Security portion of the Self Employment tax. All of your total combined wages, tips and net earnings, went to the 2.9% part of the Self Employment tax that goes to Medicare.
Future Research
What other factors go into the cost of running a freelancing business?
How do you figure out how much you are going to charge?
What are the typical rates for a freelance designer?
Its so lame that freelancers effectively have to pay higher taxes than people who work within a company. I feel like it should be the opposite.
ReplyDeleteIts so lame that freelancers effectively have to pay higher taxes than people who work within a company. I feel like it should be the opposite.
ReplyDelete