Being a successful freelancer requires efficient and accurate bookkeeping. This will not only ensure you’re getting paid correctly, but it will also help minimize your tax burden. Even if you have an accountant to assist with your tax planning, it will be challenging to achieve your goals if your books have been neglected. Here are a few tips that will make managing your finances more straightforward.

The Freelancer’s Guide to Bookkeeping

1. Keep Accurate Records 

When you freelance, it’s your responsibility to keep track of every aspect of your business. This includes the hours you work, your profit and loss, and your tax payments. The more detailed your financial records are, the easier it will be to balance your books and devise an effective tax planning strategy. Be sure to hold on to every receipt and keep them organized so you can maximize your deductions, make copies of invoices and checks, and create a reminder for important tax dates. 

2. Save Part of Your Income for Taxes

For freelancers, tax planning is a year-round event. Since you don’t have an employer withholding and paying taxes on your behalf, you should estimate how much you owe the IRS and make sure that money is available when it comes time to make a payment. The general rule of thumb is to set aside 30% of each paycheck. This will prevent you from being unpleasantly surprised with a tax bill you can’t afford to pay.

3. Separate Your Personal & Professional Assets 

Balancing your books can be difficult if you don’t separate your personal finances from those you use for the business. To avoid confusion, open a different bank account designated just for transactions related to your freelancing work. This will let you see exactly how much money you have to work with for business expenses and make budgeting simpler. 

Bookkeeping can be a daunting task to tackle on your own, especially if your finances are more complex. Whether you’re feeling overwhelmed or simply want to make the most of all your hard work, the accountants at Bergamo Tax & Financial Solutions will help. With over three decades of experience, they will save you time, money, and stress by getting your records in order and ensuring your tax obligations are met. Based in Watertown, CT, they provide reliable business accounting and tax planning to entrepreneurs in the surrounding areas of Middlebury, Waterbury, and Litchfield. Call (860) 274-1655 to schedule an appointment, or visit them online to learn more about the full range of services they offer.