Horowitz Sara - The Freelancers Union Guide to Taxes

APPENDIX

BOOKS & SHORT PUBLICATIONS

Thompson, Brigitte A. Bookkeeping Basics for Freelance Writers.

ARTICLES & WEB PAGES

Freelancers Union. Independent Workforce Issue Brief: Tax Challenges. (fu-res.org)

GOVERNMENT RESOURCES

Internal Revenue Service (IRS) (irs.gov):

AZ Index for Business

Barter Exchanges

Bartering Income

Bartering Tax Center

Child Care Tax Center

General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G)

How to Choose a Tax Return Preparer and Avoid Preparer Fraud

Instructions for the Requester of Form W-9

IRS Publication 15 (Circular E), Employers Tax Guide

IRS Publication 15-A, Employers Supplemental Tax Guide

IRS Publication 334, Tax Guide for Small Businesses

IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses

IRS Publication 502, Medical and Dental Expenses

IRS Publication 503, Child and Dependent Care Expenses

IRS Publication 505, Tax Withholding and Estimated Tax

IRS Publication 509, Tax Calendars

IRS Publication 526, Charitable Contributions

IRS Publication 530, Tax Information for Homeowners

IRS Publication 535, Business Expenses

IRS Publication 538, Accounting Periods and Methods

IRS Publication 583, Starting a Business and Keeping Records

IRS Publication 587, Business Use of Your Home

IRS Publication 936, Home Mortgage Interest Deduction

IRS Publication 946, How to Depreciate Property

IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans

IRS Publication 970, Tax Benefits for Education

Is Your Hobby a For-Profit Endeavor?

Recordkeeping Tips for Barter Transactions

Self-Employed Individuals Tax Center

Self-Employment Tax (Social Security and Medicare Taxes)

Tax TopicsTopic 420 Bartering Income

Tax TopicsTopic 509 Business Use of Home

Tax TopicsTopic 704 Depreciation

U.S. General Services Administration (gsa.gov) Per Diem Rates

WEBSITES

Datamaster Accounting Services (datamasteraccounting.com)

ORGANIZATIONS

American Institute of Certified Public Accountants (aicpa.org)

ABOUT THE AUTHOR

Sara Horowitz is an innovator for tomorrows workforce.

As Freelancers Unions Founder and Executive Director, Sara Horowitz has been helping the new workforce build solutions together for nearly two decades.

A MacArthur Foundation Genius fellow and Deputy Chair of the Federal Reserve of New York, Sara has long been a leading voice for the emerging economy. Today, 53 million Americans are independent workersmore than one-third of the entire workforce.

Relying on her experience as a union organizer and labor lawyer, Sara founded Freelancers Union in 1995 to create power in markets and power in politics for this rising workforce.

While growing Freelancers Unions membership to more than 250,000 nationwide, Sara has helped develop a new form of unionism driven by social-purpose business models.

Sara recognized that one of the biggest challenges independent workers face is their lack of access to affordable health insurance. To help solve this problem, Sara in 2008 launched Freelancers Insurance Company, a social-purpose business wholly owned by the union providing independent workers with high-quality, affordable, and portable health insurance. The unions National Benefits Platform, launched in 2014, now helps freelancers across America access benefits like health insurance, 401(k), and life, liability, dental, and disability insurance.

Carrying on the tradition of turn-of-the-century social unionists, Sara has also built two integrated primary care clinics providing no-copay care to union members. The Freelancers Medical sites in Brooklyn and Manhattan also host networking events, education classes, and other member events.

Sara has been named one of Forbess Top 30 Social Entrepreneurs, Businessweeks Top 25 Most Promising Social Entrepreneurs, and the World Economic Forums 100 Global Leaders for Tomorrow. Her recent book, The Freelancers Bible, was named one of Forbess Best Books to Boost Your Career.

Sara is the daughter of a labor lawyer and granddaughter of a vice president of the International Ladies Garment Workers Union. After studying at Cornell Universitys School of Industrial and Labor Relations, she earned a law degree from the SUNY Buffalo Law School and a masters degree from Harvards John F. Kennedy School of Government.

Sara is a lifelong resident of Brooklyn, New York.

TAKING CARE OF TAXES

First, a disclaimer. Everything freelancers need to know about taxes cant be covered in a short ebook. Tax regulations also change over time and differ from state to state. Primarily, this book focuses on federal taxes for the sole proprietor. It includes explanations of some of the top tax deductions for freelancers, and it outlines the basics of estimated taxes and tax issues when subcontracting or hiring. Later, we address record keeping and some of the issues surrounding business structures and passive income. At the end of the book is an appendix listing, among other resources, IRS publications worth checking out. But dont stop there! The IRS website is packed with useful info thats surprisingly comprehensible, considering the crazy complexity of the tax code. For state and local tax regulations, check your state tax department. Build your knowledge through reading and talking with qualified pros (your accountant; your attorney) about your situation.

Take this short true-or-false quiz:

True or False: Freelancers get hit with a bigger tax bill than staff workers.

Answer: True. Employers share the burden of paying Medicare and Social Security tax. Freelancers, as boss and worker bee, get to pay both, as self-employment tax.

True or False: Self-employed workers tax returns may get more IRS scrutiny than traditional employees.

Answer: The ways of the IRS are known only to the IRS. What we do know is that the IRS gets a copy of the W-2 form staff workers receive from employers detailing their income. The IRS can just match this against the staffers tax return and say, Yep, that checks out.

You, freelancer, arent an open-and-shut case. You have income from multiple sources. Youre deducting business expenses. Both fluctuate. This makes you potentially interesting and possibly complicated to someone whose job description is: Make sure Uncle Sam gets his due.

True or False: Freelancers have to keep more detailed tax records than traditional employees.

Answer: True. For the reasons in Statement 2, whether they do their own bookkeeping or hire someone, it costs freelancers time and sometimes money to document their income and maintain detailed records and files to prove their deductions.

True or False: Freelancers have to be more consistent about saving money for taxes than staff workers.

Answer: True. While everyone has to save for taxes, employers help by withholding and paying taxes from employees paychecks. Freelancers, lacking that built-in step, often have to save and pay income tax four times a year (estimated tax), keep books on the payments, and often pay an accountant to calculate them.

Im front-loading the bad news because it helps explain why it pays to get smart about what you can deduct, and why good record keeping and reporting are essential, so you can back up your deductions with confidence. On the upside, there are opportunities not to be missed.