Getting by as a freelancer

If you make any income, you have to pay taxes.

That's how it is, and it's just that simple...unless you want to not report it, and thus, take your chances on getting audited and caught.

In that case, you'd have to pay through the nose, even worse, anyway, because of penalties, when that happens.

As playthrough suggests, paying estimated taxes each quarter is the best way to go about handling this issue.

 

It's the only way. If you don't make the estimated payments and pay it all in April, they'll hit you with penalties. And your estimated payments have to be pretty close to the actual amount or over -- they won't allow you to pay $200 every quarter then pay the big balance in April.

Had a friend who wanted to hold the money and pay it all at once. He said, "Why should I give them an interest-free loan?" He found out why. The deck is stacked in their favor, and they can hammer you badly.

 

I understand about the quarterly payments and penalties and all that fun stuff.

playthrough (or I guess anybody who will be kind enough to respond for that matter): When I was a full-timer with benefits, I was paying into the social security pot with the idea that when I retire I would then receive those benefits. If I lived strictly as a freelancer until the day I "retire," (and was paying social security taxes that whole time) would I be receiving any retirement benefits once I retire??

If not, then that doesn't seem right that I spent a lifetime paying into the social security pool but then would not be able to pull from it once it's my turn.

I hope I'm explaining this clearly. Forgive me if I sound ignorant and I really do appreciate your guys' feedback.

 

So I will be entitled to reach my hand in that social security pot when the time comes as long as I'm paying the SS taxes now? That's what I was trying to clear up given the fact that I don't have any formal 401k or retirement plan anymore like I did when I was full time.

Again, thanks for the info. I don't feel nearly as bad about forking that over now.

 

I must be lucky. I've never been hammered or hit with penalties by waiting to pay in April instead of quarterly.

But I know I should pay quarterly.

 

You can pay it all in April if you want to. It may be much harder to afford when the time comes, though.

Penalties will come if you don't report it, either quarterly, or all in April, and then get caught.

As someone who has paid taxes on freelance work both ways -- quarterly estimated taxes (there are forms you can/should get for it), and in a lump sum in April, in various years, I found the quarterly set-up to be much more palatable.

 

I have always filed annually, and have always received a refund, largely because my wife's income has had its withholding and we had children at home/in school (such is changing) ... Do make sure your expenses (I take the standard mileage deduction) are all accounted for, and that should work in your favor ... I once bragged that I kept better records than the IRS could ever ask for ... then came the audit ... five minutes into the examination, the guy looked at my stuff and said "I don't know why we brought you in here" ... that was eight years ago, and I haven't heard from them since ... as was stated earlier, better to look at freelancing as a lucrative side job than a full time source of worry, so if you can land a 40 hr gig that is also to your liking, then do that (I did last year after 14 yrs of strictly stringing) ... and as Moddy mentioned, doing the work is one thing, getting paid on time is something quite another ... that actually became a sticking point in my marriage (my wife handles our checkbook), because Mrs. Dan could never count on the $$ flowing in when they were needed ... that's another reason I took a daily gig (while still hanging on to all my freelance work) ... there is so much more to say, but I'll give up the floor, now

 

These discussions of the differences between social security and pensions, and those who don't understand the difference, means that our consumer and financial education in this county is pathetic.

 

It's one of those things that people tend not to care or think much about, or to try to understand, until they realize that, "'Oh, this really does matter...and it applies to me, too.'"

 

I blame parents.

 

So you guys have never had a question about your taxes, benefits, etc.?? I find that awfully hard to believe. If you were so smart you wouldn't be a sportswriter making minimum wage. Thank you to the people who were helpful. All the rest of you can get a life.