Factors to Consider When Reporting Income on Freelance Graphic Design.
It is important to note that the gig economy is gradually expanding. With this trend, many workers will be independent contractors in the near future. With all these factors considered it doesn’t mean you are way too far behind the major developers if you decide to start your freelance design company. As a private business owner, you need to file your tax returns just like any other regular employee. This article will discuss the important factors to consider when reporting income for tax purposes for the freelance design business.
If an individual is starting to invest in freelance graphic design then there is need to ensure they understand the numerous tax laws controlling such private companies. If you are operating freelance graphic design, it is considered that you are self-employed. For this situation, you’re required to document government forms each year and pay assessed charge quarterly. An individual is required to pay self-employment tax plus the income tax. Self-employed tax is a Medicare and Social Security charge for the independently employed. It is important to note that the tax is deducted from your total income and calculates as a fraction of approximately fifteen percent of the earnings. However, before an individual pays the required self-employment tax they need to establish their net income or net loss. To obtain the correct figure, you need to subtract the total expenses from the earnings you have generated. In a situation where the business expenses exceed the income, then it is not compulsory to pay the tax. If your net profit is four hundred dollars or more, you need to file income tax return.
The second important factor for the investor to consider is to ensure they gather all the relevant details. The business is required to have all the data needed regarding the various clients or companies it serves by allocating correctly the amount of freelance income obtained from each entity. There is a limit for this type of information. It is important to note that established companies provide particular forms to their customers to help them get the relevant information. If You getting payments through online means then it is important you let your customers know in advance. It is important for the business to file information obtained from numerous customers as this is critical in the management of records and gathering of relevant data. Having paystubs will help the business make accurate calculations and avoid unnecessary expenses. If you don’t get one from your customers, you can make free pay stubs effectively on the web.
It is important for the freelance graphic design company to know the various expenses that are not included when filling the returns for tax purposes.