The internet gives one many opportunities to make money as a freelance writer. You can work for content mills, private clients or run your own blog. If you are just starting out as a freelance writer, it is important that you keep track of your expenses and income so when tax times rolls around, you are prepared. Here are four tips designed with for a new freelance writer.
Open Up A Business Bank Account
Even if you depend upon your writing income as your primary source of income, you should set up a business bank account. Setting up a business bank account will make it significantly easier to keep track of your income and expenses.
You will easily be able to look at your statement and see when you were paid and what you were paid for each of your clients or content companies you work for. When you need to purchase things for your freelance writing business, such as Copyscape credits or Grammarly, you will be able to track those expenses more easily. They will stand out more when they are not mixed in with all of your personal transactions.
You can also set up a payday for yourself. When you freelance and your money comes in at sporadic times, it can be difficult to know when your money is coming in. By setting up a business account, you can build up income, and then pay your personal account at the same time every month, such as the 1st and 15th, or every Friday.
Set Up An Invoice & Proof Of Payment System
As a freelance writer, you are probably getting income from multiple sources. Each of those sources may accept different invoice types and have different payment methods. Due to the variation of invoice and payment systems that private clients and content mills have, it is vital that you set up a system of your own for keeping track of that information.
For example, if you have to submit a digital invoice of your work and then are paid through PayPal, you may want to take screenshots of your invoice and PayPal payment. Or, you can print and save that information in PDF format. From there, you should create two folders for that client labeled "Invoice" and "Payment." Finally, you should have a master spreadsheet or accounting program where you can enter all that information.
If you decide to go digital, make sure that you back up those files to a cloud account or USB drive. Create a consistent system, such as screenshots or PDFs, to keep track of each client's invoices and payments that you work with.
Keep Track Of Expenses
It is also vital that you develop a system to keep track of all of your expenses. Remember, everything adds up. If you pay to run your articles through Copyscape or a similar plagiarism checker site, make sure that you print or take a screenshot of every receipt. If you pay for a cloud storage account to back up your work, keep track of that.
Every little expense that you purchase for the purpose of your business, which is what your freelance writing career is, may potentially be written off at the end of the year.
Decided If A Home Office Is For You
Finally, if you are just getting started as a freelance writer, you need to think about your work space. Where you work is both a practical matter and a tax matter.
If you do not like to work from home and decide to rent out a work space or office space, all of those expenses would be deductible from your taxes.
If you like to work from home, you need to think about where in your home you want to work. If you decide to set up shop in your living room where you also like to hang out with the family, you will not be able to deduct home office expenses from your taxes. In order to so, you need to set up a dedicated space in your home that is only used for work purposes and you would need to keep track of your monthly household bills so you can figure out how much you can deduct for a home office at the end of the year.
As a new freelance writer, it is vital that you make an effort to set up personal and business accounts, and it is also vital that you treat your writing career as a business. Keep track of all invoices, payments and expenses. Doing so will make it easier for you to file your taxes and it will make it easier for you to see what you are bringing in each month and what you are spending. If you need assistance with this, sit down with an accountant and have them help you develop a business plan that will enable you to keep track of the financial side of your writing career.
Contact a professional like Hy Appelbaum CPA to learn more.