Tax Day aftermath

I blogged earlier today about the extension for last-minute filers, due to the IRS system going down yesterday.  Apparently the site had a message on it during the outage saying it wouldn't be back up until December 31, 9999.  Wish I'd gotten to see that!

I ended up working on my taxes for about 14 hours straight overnight Monday into Tuesday, which is a good argument for being better about keeping my records up-to-date this year.  Updating the records, going through all of my old receipts, filing last year's taxes (I still hadn't!), and getting organized took most of that time.  Actually working on this year's tax returns probably only took about four hours, and a lot of that was rearranging my spreadsheet so that all of my expenses were listed under the correct categories.

So.  Next year.  Stay up on the reporting.

Tax Day extension

I meant to post this sooner -- like yesterday -- but I was exhausted and fell asleep early in the evening.  More to come about that later.

For those who need to know, though, there is an extension on the Tax Day deadline to TODAY because the payment system went down yesterday.  So if you haven't finished yet, you do still have today left to do it!

Tax Eve and why it's better this year

Happy Tax Eve to those who are spending tonight doing their taxes!  I'm risking a little fuzzy-headedness and doing mine in style.

I'm risking some fuzzy-headedness here obviously, so hopefully it won't backfire on me.  But I think I can relax responsibly, and it might help with the overall motivation problem of taxes!

Why Tax Day falls on Tuesday the 17th

You may have noticed that Tax Day is on Tuesday this year, April 17th, instead of the usual April 15th.  With the 15th falling on Sunday it's obvious why it's not that day, but did you wonder why it's not Monday?

I was afraid I was getting wrong information and didn't want to file late, so I looked it up to be sure, and this is what I found.

Tax Day for freelancers: 2015 in review, and plans for 2016

Tax Day this year falls on April 18th -- something about them not wanting the next day to be Saturday.  This also means, for freelancers, that your first estimated tax payment is also due on the 18th.

My first few years of freelancing I was always ahead of the game, getting my taxes done early.  After a while, though, I stopped being as organized about recording my income and expenses throughout the year.  This meant that it all had to get done at tax time, which made preparing my return so much harder.  This, in turn, meant procrastination and last-minute filing.

This year, I did a little better, finishing my taxes a week ahead of time.

Tax Day resolutions

My habit in recent years has been to leave everything about taxes for the last minute, including the recording of income and expenses.  Last year I made an effort early on to keep on top of it, and I was successful until about May -- which made taxes a little easier this year, but next year I'm hoping to be even better about it.

I also tried to get an earlier start this year, and for the most part succeeded, although it still wasn't quite as early as it needed to be.  I intended to start on reporting the week before, but I was so busy that week that it didn't happen.  Plus, I got the sad news that my friend and trainer's six-year-old son was killed in a tractor accident and her husband severely injured, so I was distracted and not really feeling up to getting anything done for a few days.

Blood moon and taxes

At this point I'm not even sure how I am still awake.  Since I woke up a little after 9 o'clock yesterday morning, I've gotten less than four hours of sleep, and all of that was around midday today.

I'm sure anyone who realizes today was Tax Day can figure out the reason for my lack of sleep.  I used to be so much better organized, and even used to get my taxes done early, but the last few years I've been catching up on my bookkeeping for the year and working on taxes all in the last few days before Tax Day.

Happy Day-After-Tax Day!

We did our tax returns at the last minute this year, thanks to my poor recordkeeping habits last year.  When I mailed them yesterday morning, I had such a feeling of relief and freedom.  No more worrying about it anymore!  I know procrastinating isn't a good habit, but I do love the almost euphoric feeling when you finally get something done that you've been putting off for a while.

It was also nice that we owed less than we thought we might.  Not to mention, doing our taxes was the kick in the pants I needed to finally clean my desk.  It was starting to look like a disaster area — my laptop was an island amid stacks of papers.  Yikes!  I feel so much less frazzled now that I have a clean desk... or maybe that's just the post-Tax Day euphoria again!

What about you?  Did you do your taxes early this year, or at the last minute?  Was the end result good news, or bad news?

The importance of good record keeping for freelancers

Usually I'm pretty good about record keeping.  I record every payment in an Excel spreadsheet as they come in, and create a PDF of the payment details if it's a PayPal payment or scan it if it's a check.  I do the same with expenses.  I've been doing this since I first started freelancing part-time in early 2005, and it has made tax time relatively easy every year.

Last year, however, I was BAD.  I stopped recording payments and expenses about halfway through May.  As a result I had no idea until last night how much I'd made for the year, and only vague impressions regarding which were good months and which were not-so-good.  (This was actually one of several things that I was slacking off on last year, but I'll talk more about that in a future blog post.)

What I learned last night is that when you don't keep up with the record keeping throughout the year, at some point it makes you pretty miserable.  I spent the entire day yesterday on getting caught up through December.  (I did start this year off by staying on top of it, so my 2011 records are up to date.)  The best I can say about that is at least I did it in February instead of on April 14th, but still, it was a brain-numbing process that I'd rather not have to go through again for a long, long while.

I still have to get caught up on the expenses, but at least that is a much smaller task.

So, my fellow freelance writers, take it from me — it is definitely worth your while to take a few moments to record it every time you receive a payment or buy something for your business.  I like to have two separate spreadsheets, one for income and one for expenses.  My income spreadsheet has a separate page for each client and a main page that that gives me a grand total, as well as totals per month.  My expenses spreadsheet is much the same, except that I have a separate page for each expense category on the Schedule C.

In past years, when I've kept up on my record keeping, tax returns have always been a breeze to do.  I've never understood why freelancers complain until this year, when I had to do all that work to catch up... and I'm still not done yet!

What about you?  Do you do your record keeping throughout the year, or do you do it all at tax time?  Do you have a system in place, and how does it work for you?

Juggling acts: Taxes, freelancing, and loss

The confusing, convoluted process that the government makes you go through to file your freelancing taxes never ceases to amaze me. I marvel at this particular one every year:

In order to complete Form 1040, I need to first complete Schedule C, to determine net business income.

In order to complete Schedule C, I need to first complete Form 4562, to determine the deduction I get to take for business equipment.

However, in order to complete Form 4562, I need to know our total gross income for the year, from the 1040.

Why could they not make this a more linear, logical process?

I had the worst April 15th of my entire life, as I had to file taxes and euthanize my beloved cat, who has been with me for 11 years this month, on the same day. As you may know from previous years, I don't usually file at the last minute, but part of the reason has been my intense focus on Prince — I've been force-feeding him for the last 5 months, and although he seemed happy up until he suddenly got dramatically worse a couple of days ago, taking care of him took up a lot of my focus and my energy.

Taxes and freelancing must go on, though. I am not taking any official break from work, though I plan to take it easy over the next few days, and of course the IRS waits for no cat. Check back for a link to my Pony Tales Blog, where I plan to write a longer post on losing Prince.

Is the home office deduction getting safer?

While doing some research for a client project, I happened across this article from last year, and saved it for comment on my blog:

Slowdown may boost home-office deductions

The article anticipated that in the coming year, the number of people working from home and claiming the home office deduction would increase. Supposedly the slower economy was expected to make people more likely to work from home in order to make ends meet. I assume they mean unemployed people or part-time businesses on the side of regular jobs, because it takes a lot more dedication than simply wanting to make ends meet in order to make a home business suffice as the only source of income!

Since the article is a year old, I can't help but wonder if the IRS really saw the predicted increase in home office deductions.

I also found it interesting that the article claims the home office deduction is no longer a red flag for an audit. I've heard that before, but I've been somewhat reluctant to give any credence to it. I'd rather be safe than sorry; and besides, removing all personal items and activities from my office space would be too complicated, so I'm rather content not taking this deduction.

What about you though? Do you take the deduction, and do you think there's any truth to the statement that the home office deduction is a red flag for an audit?

The day after Tax Day

Yeah, I've been busy this week — so busy that I didn't do my usual "taxes for freelancers" posts as Tax Day approached. See, this year I didn't get my taxes done several months early, like I have the past three years. Michael and I worked on our taxes (since we're filing jointly) Sunday night, and I mailed our Federal return (Colorado offers free online filing for state) on Tax Day.

Once again, we estimated our tax liability pretty closely. We got a little bit of a return from the Federal government, which we put towards our estimated payments. We owed the state a whopping $5, which I found immensely amusing.

I also mailed my first quarterly estimated tax payment for 2009. Ouch! January and February may have been slow, but since March was (and April is looking) more or less back to normal, I didn't reduce my estimated income. So a larger percentage of my income than usual (since I make four equal payments) went to paying estimated taxes for those months , and that hurt a bit.

It's a huge relief to have all of that behind me. There's no way I'll do them so late again — having at the back of my mind for three months weighed on me more than I realized. What about you? How did taxes go for you this year, and are you relieved that it's over?

Why can't the IRS spell my name right?

Last year was the first year I made quarterly estimated tax payments in both my name and my husband's. (We were married in 2007, but I kept making them under just my name for the sake of consistency.) Today I received the packet of forms for 2009... And they had my name spelled wrong.

Again.

Now, I know that Katharine is apparently very difficult to spell — I get everything from Katherine to Katerhin. (Don't ask me how they got that last one. All I know is it was in a byline and I was pissed.)

But really, this time it's from the IRS. You'd think that would mean something.

Let's hope they are better at social security numbers than they are at names.

Fourth quarterly estimated tax payment due soon

Freelance writers, don't forget: Your fourth quarterly estimated tax payment is due on January 15, just over a week from now.

The only exception is if you plan to file your 2008 taxes and pay anything you owe in full by January 31.

I'm feeling the pinch this year, because the fourth estimated tax payment comes so close after Christmas. I would love to wait until the end of the month and just file my taxes then, but unfortunately, since my husband and I itemize it's much easier if we file together.

What about you? Do you pay the fourth estimated tax payment by January 15, or do you wait and just file your taxes by January 31?

Obama's plan for small business and freelance taxes

Watching the third and final presidential debate tonight, I noticed a lot was made of the taxes freelancers and small businesses would face under Obama versus McCain. Since I am a freelancer and a sole proprietor, as are most of my readers, I thought some blog commentary would be appropriate.

Senator McCain argued that under Obama's tax plan, "Joe the plumber," a lowly small business owner, would be paying more in taxes than he could afford. McCain didn't seem to understand Obama's point that since Joe's plumbing business was making well over $250,000 a year, it wasn't really a small business, and should be able to easily afford a higher tax rate.

I found some information about small businesses on The Caucus, a political blog on the New York Times' website. The blog post, which analyzes some of the errors both candidates made, supports Obama's claims about how his tax plan would affect small businesses in the United States.

According to figures compiled by the Small Business Administration, there are fewer than six million small businesses that actually have payrolls. The rest are so-called "non-employer" firms which report income from hobbies or freelance work done by their registered owners, earning as little as $1,000 a year.

Of these, according to a calculation by the independent, non-partisan Tax Policy Center, fewer than 700,000 taxpayers would have to pay higher taxes under Mr. Obama’s plan. But even some of these are not really small business owners in the traditional sense. Instead, they include lawyers, accountants and investors in real estate, all of them with income over $250,000 a year.

So are there "millions more like Joe the plumber," as Mr. McCain contended? Probably not. Mr Obama may well have been correct when he stated that "98 percent of small businesses make less than $250,000."

I definitely don't think it's fair that big companies and corporations should get extraordinary tax breaks (which McCain supports) while I am held accountable for every penny — so as a freelancer and a sole proprietor (among other things), I definitely support Obama.

2008 third quarter estimated taxes due

This is just a friendly reminder that 2008 third quarter estimated taxes are due on Monday, September 15, 2008.

Remember, if you are going to owe more than $1,000 in taxes at the end of the year, you are required to make quarterly estimated tax payments. As long as you make your estimated tax payments on time and pay the same amount you paid last year, you won't be penalized come tax time if your estimate was off. However, if you don't make payments and you owe more than $1,000 at the end of the year, you will also have to pay penalties on what you owe.

I don't know about you, but it always seems to me like the months when estimated taxes are due are always the tightest — even before you figure in the tax bill. For instance, this month I had the unexpected expense of moving my horse to a new home on short notice.

Do you also find that the IRS has the worst possible timing?

Second quarter estimated tax payments due Monday

This is just a friendly reminder for my fellow freelancers that your second quarter estimated tax payments for 2008 are due on Monday.

Remember, if you are freelancing enough that you will owe more than $1,000 in federal taxes at the end of the year, you need to make estimated tax payments in order to avoid having to pay penalties at tax time. Or, if you have a regular job and just freelance on the side, you can have a little extra withheld from each paycheck to help cover the additional taxes.

Whatever you decide to do, you had better decide it soon, because the next estimated tax payment is due on the 16th — and there are penalties for late payments!

Whoops! Here it is... Estimated tax time!

I've been so wrapped up in thing lately that I didn't even notice it was getting to be time to do my estimated taxes for the year. Getting taken unawares is no fun, especially when I'll need to figure my estimate taxes and shell out a large sum of money all in the same two-week period.

If you are new to the freelance writing scene — or even if you're not — you should know that you need to pay quarterly tax payments. If you don't, and you owe more than $1,000 in taxes at the end of the year, you will owe a penalty in additon to the taxes.

Basically, you won't be penalized as long as:

1) You owe less than $1,000 at the end of the year, OR
2) You paid at least as much in quarterly payments as you paid last year (and the payments weren't late).

If you haven't paid estimated taxes before, the form you need is here: Form 1040-ES. (Not to be confused with the 1040 Schedule SE, the self employment tax form... Who named these???) Even though I paid my quarterly estimated taxes in both 2006 and 2007, I still like to use the worksheet, because it helps me to see the figures and do the math on paper.

Bush 'helps' small business owners

President Bush is again touting his tax rebate plan's ability to help small business owners.

According to this article:

The president said his administration — with legislation approved by Congress — had taken "decisive action" by getting money for taxpayers and businesses, which are to receive tax incentives to invest. He said that will create new jobs.

It sounds like garbled BS to me, created primarily to sound like they're doing something important. "Decisive action"? "Tax incentives to invest"?

To invest in what, pray tell? My husband's wine collection? (He'd like that.)

Then there's this nice quote from Bush:

"Small business owners are dreamers and doers," Bush said. "We want to watch them and help them expand."

Oh yeah? Well then, give us a break on the friggin' self-employment tax! Seriously, nothing dissuades someone from starting a small business faster than when they realize they'll have to pay a 15 percent self-employment tax!

Tax relief update and more tax resources for freelancers

I'm staying on top of the income tax news this year, it seems: I've already blogged about 2007 tax forms for freelancers, and potential tax relief that could affect freelancers.

As an update on the latter, it sounds like Congress has worked out the details of a tax relief package. Everyone will be getting a rebate of at least $300 each, though it'll probably be summer before anyone sees the money — the IRS can't issue special rebate checks and process 2007 tax returns all at once, it seems.

The package is also supposed to provide "tax breaks for businesses," including "more generous expensing rules" for small businesses. Presumably this should all take effect for 2007 tax returns, since the goal is to stimulate the economy NOW, but I just don't see how that's going to work. Most of us only keep receipts for things we know we can expense, so I doubt changing the rules at the last minute will be very effective for 2007.

For 2008, though, it might be great — if they tell us soon what the new rules are. Which brings me to my second reason for this post: to share more tax resources I stumbled across.

* Tax Law Changes for Individuals — This page sums up all the changes in tax law that you should be aware of before filing your 2007 tax returns.

* Small Business and Self-Employed One-Stop Resource — This page contains numerous resources for small businesses and self-employed individuals, including a page for recent business-related tax news.

I'm hoping that when they make a more formal announcement about the current tax relief plan, the changes will show up in these places.

I also was interested to find that the IRS offers online lessons to help small business owners and self-employed individuals learn what they need to know about filing their taxes: running your business with tax requirements in mind, and running your business out of your home.

There seems to be a lot of good information on these pages, so I hope you find them helpful!