Throughout my years living in New York City, I’ve been doing various Side Hustles – ranging from babysitting to tutoring to tech support to writing – in order to pay my bills and eat.
As of end of 2018, I’ve come to the place in my Side Hustle Life where I should begin figuring out how Self-Employment works. Things like 1099s, retirement accounts, and paying quarterly taxes.
There are things I haven’t even began touching yet, like opening a work-specific credit card, because so far, my expenses have been very low. But doing my 2018 taxes, I can see how tracking a lot of things can help me with lowering my tax burdens for 2019.
I don’t know if I’m doing any of this correctly, or if I’m going to end up being audited. But hopefully as I learn things, I’ll keep reporting on them, and we’ll see next year if what I did worked out!
Few things I’m keeping in mind this year:
Creating Separate Savings Accounts
I created 3 savings accounts in a high-interest online savings bank: Freelance Income, i401k, and Taxes. I put in 20% to i401k account, 30% into taxes, and 50% into the Freelance Income account.
Hopefully these estimations are close enough, and I won’t have to scramble to find money to pay the government!
I have been looking into i401k (Individual 401 (k)) for a few months, and while I gave up for 2018 since I only made $1,000, and I felt like it wasn’t worth the stress and work to open one in time, since I am slated to bring in at least $7,000 in taxable 1099 income for 2019, I want to open an i401k account.
Since I already have 2 other accounts in Vanguard, I’m highly considering opening the i401k account in Vanguard as well.
Since I already max out my 401k from my day job, I can only put money into the “employer contribution” “slot,” which will probably be around 20%, according to Oblivious Investor’s Solo 401(k) Contribution Calculator.
I learned about Quarterly Taxes for Self Employment last month, and of course, I didn’t pay it for Q4 last year (when I received the check). So I guess I might owe a penalty for it when I’m doing my 2018 taxes? Who knows.
This year, I’ll hopefully be on top of it. There is a Self-Employed Individuals Tax Center page by the IRS, but I might just get something like Quickbooks to help me keep track of everything… Since I already have so much going on, I want to lessen my administrative load as much as possible.
Keep Receipts & Track Business Expenses
It doesn’t take much to run my “businesses,” but while doing my 2018 taxes, I saw that there are a lot of things that qualify as “business expenses.” I’m going to have to keep a better eye on things that could qualify as deductions so I can make most of my hustle.
One such that I’m looking into is possibility of buying a new laptop. Currently, I don’t have a functional personal laptop, so if I change jobs, or if my freelance works becomes more labor and file-storage intensive, I might just go ahead and buy myself my own Macbook Pro. Yeah, yeah. Take my Personal Finance Blogger badge away. I like shiny things. 😉
I have spreadsheets of incomes and expenses, and hopefully will keep them updated throughout the year.
Are You a Seasoned Freelancer?
Do you have any tips or suggestions for us Freelancing Newbies? Any hard-learned lessons or pitfalls to avoid? Let me know, because I totally feel like I’m going into a dark cave!