Do Freelance Writers Have to Pay Taxes?
I wish I could tell you that freelance academic writers don’t have to pay taxes, but the truth is we all have to pay taxes. In fact, working as an independent contractor means you need to pay higher taxes than if you were an employee, because you also have to pay into Social Security and Medicare (instead of your employer). So, yes, freelance writers must pay taxes.
Do I Get Any Deductions?
Having said that, you can definitely take deductions from your taxes that employees cannot necessarily take. Your computer, your internet service (or some percentage thereof), the part of your home that you use as a home office as well as the appropriate percentage of utilities for the office, the paper you use to print out materials for papers (if you work that way), your office equipment and furniture – all of these and more are legitimate deductions from your taxes as a freelance academic writer. Your best bet is to have your taxes done professionally at least once so you have a sense of the kinds of deductions that are allowed (and not allowed).
Should I Turn Myself Into a Company for Tax Purposes?
Well, yes and no. For some fields, there are some definite advantages to incorporating yourself as a business. The primary advantage is the limitation of liability, particularly if you incorporate as an LLC. Doing so generally places your personal assets off limits in cases of litigation or loss of revenue for any reason.
However, academic writing does not tend to carry a risk of litigation, nor does it tend to incur the loss of revenue due to such things as ruined inventory. Your best bet is to consult with a tax attorney to see if your particular situation would benefit from incorporation.
What Happens if I Don’t Pay My Taxes?
One of the most typical mistakes independent contractors make – especially when they are new to this arrangement, and used to employers deducting their taxes – is that they do not pay their taxes in a quarterly fashion. Failure to do this tends to lead to an enormous sticker shock kind of experience come tax time, when suddenly a very large amount of money is due all at once. Penalties for not paying quarterly may also be applied, which drives up the figure even higher. This situation (among others) can lead people to simply not pay their taxes.
What most likely happens in such cases is nothing – for awhile. The IRS doesn’t have the desire or resources to hunt down every single person who is late or delinquent in not filing their taxes. However, eventually they will notice, and they will find you. Luckily, the IRS isn’t interested in punishing people; they just want their money. So if you make a reasonable effort to pay them back, either in one installment or via a payment plan, they will almost certainly not press charges. Try to evade them for any length of time, however, and the consequences become more dire, including the garnishment of wages, the levying of heavy penalties and fines, and worse.
Honestly, it’s easiest to just pay your taxes.
When Is It Time to Seek Professional Advice?
If you are new to freelancing and/or the world of independent contracting, it makes sense to seek the services of an accountant from the beginning – at least for the first year. Let them help you through the process of paying your quarterly taxes and filing your annual return. If you learn from them for an entire year, you might well be able to handle everything on your own the following year. Then again, it is nice to know that you’re in good hands when dealing with something like taxes, so you just might end up forming a long-term working relationship with your accountant. Everyone is different – just don’t forget to take care of your financial life.
** Please note that this article was not written by a tax lawyer; therefore, nothing contained herein should be considered legal advice.