In an era of corporate downsizing and economic uncertainty, freelancing is on the rise. Many companies are hiring freelancers to do work once done in-house. Businesses benefit by not having to pay employee-related expenses (such as health insurance and workman’s comp), and freelancers’ benefit from having the freedom to set their own schedule and work when they want. 
The freelancing lifestyle brings one very significant change that can take some getting used to; taxes. As an employee, your tax withholdings are mostly taken care of for you. However as a freelancer, you are responsible to pay not only your income taxes, but your self-employment tax as well.
Here is a quick guide to help freelancers get a handle on the critical area of taxes:
Understand what you are responsible to pay: As mentioned earlier, you will need to pay both income and self-employment taxes. The amounts of each will vary depending on your net income and the tax bracket you are in. A good way to ensure you will have enough to make your tax payments is to have 30% of your gross income placed into a separate account for tax purposes only. After deductions, this should come pretty close to covering everything you owe, and in many cases you will have more than enough.
Understand what can be deducted: A whole host of deductions are available to reduce the tax burden for freelancers. Some examples include:
- Home Office
- Vehicle Mileage
- Travel
- Advertising/Marketing
- Contract Labor
- Supplies
Find out which of these and other related deductions apply to your situation, and keep detailed records in each area; preferably both on paper and backed up digitally. The more deductions you can find, the lower your net income will be, which will in turn reduce both your income and self-employment taxes.
Pay taxes quarterly: Once you have a good idea of what your taxes will be for the year, you should make quarterly payments to the IRS. The scheduled due dates are not exactly quarterly, so you will need to account for that when you divide each payment. Due dates are on the 15th of April, June, September and January.
Consider working with an accountant: An accounting firm may cost you some up front, but in the long run you will likely save time and money having an expert by your side to navigate you through the complex world of self-employment taxes. A professional accountant will know which deductions you qualify for and be able to help you set up a strong tracking system for timely tax payments and receipts.