i have some questions and concerns about registering a company for my freelance i.d. work. i’m based in nyc. between lecturing and studying, i currently do about 4~5 i.d. freelance jobs a year. i pay my own health insurance and i’m wondering if i can write this off considering i’ve only done a few intermittent freelance jobs in the course of the year ? also, since i’m studying for my bachelors in mechanical engineering (i already have my bachelors in i.d.) , can i write off tuition as training expenses since it is related to what i do ?
my concern is that some of my friends here have a freelance design business and they said if you are not getting enough income through it or don’t file your deductions appropriately that it can bite you in the ass and you may ending up owing quite a bit of money.
i have searched the boards but i’ve not seen any posts answering these questions. i know i should, and probably will, consult with an accountant on these matters, however, i would still appreciate your thoughts, experience and insight on these matters.
I don’t believe you can write off tuition, any expenses (equipment etc) that go towards your freelance can certainly be written off, as can travel. Health insurance I am not sure about.
The reality is go find an accountant - you should be able to file all of your expenses and they can help you understand what can and can’t be itemized. Most accountants should do all of this for under $200 as long as you have your receipts and stuff held onto.
The accountant suggestion would probably be the “cheapest” education you can get, in the shortest amount of time. Preferably find one who is an “Enrolled Agent”. An Enrolled Agent is a professional accountant that has earned the credentials (CPA) to represent taxpayers before the Internal Revenue Service… most are former IRS employees and a far better informed, and current, than a bookkeeper. A few more bucks than a bookkeeper, but you won’t be worrying if Aunt Trudie’s girlfriend’s husband knows what he’s talking about.
Continuing education in your field (which is ID right now) is a legitimate expense (including transportation, lodging , and meals); seminars, specific training (e.g. software training) . I have never understood why all education isn’t tax-deductible for a business.
How much you make, or don’t make, isn’t a concern (unless you’re hungry, or need a place to sleep, etc.); the tax codes allow for “business losses”, and it isn’t uncommon for a new business to run in the red for a while; for that matter, the tax codes do not require that you make a profit. In California the what will get you into trouble is sales tax collection and reporting, specifically, failing to register with the State Franchise Tax Board, obtaining a Re-seller’s Permit, and forwarding sales taxes collected to the State. This is only applicable if you are transferring tangible property to your client (drawings, models, artwork, etc.)
From personal experience, the Service Corp. Of Retired Executives (SCORE) is be another resource to investigate; retired business people volunteering to assist new business owners. They have an e-mail mentoring system, personal consultations, document templates, etc.
thank you all for responding so quickly. long term, i’m wondering if it is worth registering a business to write off expenses (while building the brand value of the business) vs just filing those freelance jobs personally each time. i really do need to meet with an accountant and i think i will also check out those enrolled agents that lmo referred to. again, thanks for your help.
Your customer should give you 1099 s for your billed contract work. So, no matter what, you’ll pay taxes on that. Where you get bit, is all year you don’t pay taxes (withholding) and have to come up with it at the end + a penalty for not paying quarterly.
You’re actually wondering how to structure your business. Sole proprietor, LLC, corporation, etc. You already a sole proprietor which is fine for a few jobs a year. You should be taking deductions. One of the best things to do is get a separate business account and pay for all of you business stuff out of that account. In my opinion, this is the easiest way to keep track of expenses. Quickbooks is also a good tool to be using to keep track of expenses.
Good question about education. It should be deducted but you’d have to ask an accountant. My daughter is in 8th grade and I’m starting to wonder how to best pay for her school in 4 years. I was thinking of hiring her and pay for her education as an employee. Fortunately, she wants to be a designer. I was going to consult with my accountant soon about this.