A few weeks ago I found myself seated in my CPA’s office nervously waiting to hear how much I would owe in taxes. But, let’s back up and start from the beginning. Last year was my first year working for myself. I returned to the U.S. after being out of the country for 2 months and really started pitching and looking for projects at the end of February. I didn’t really start bringing in money until the beginning of Quarter 2 (Q2). Even though I am a personal finance blogger and have numerous friends working in a similar capacity I didn’t file quarterly taxes last year.
Not Good
Really, it was a rookie move and a dumb mistake and as my CPA (whose name is Michele) looked at me and said that I had earned a lot last year based on what she was seeing…my heart sank a bit. Just how much would I end up owing? In fact, I haven’t owed taxes in at least 11 years so the idea of owing money to the government was quite frightening. Owing “The Man” money is no joke.
Really, I could have made my life easier by filing quarterly taxes and being basically done for the year but I did do a lot of things right throughout the past year. I am still working on my financial journey…but, I’ve hit a turning point with my money but I will keep that to myself for now.
The Good
I kept very good records for each month and recorded my income as it flowed in and out. I opened a dedicated account so that all of my business related expenses were easily tracked and managed.
I’ve learned to invoice, follow up on my outstanding accounts, and all about cash flow. I learned that I could actually earn money and survive for a year without working for someone else. That is mind-blowing to me. I earned less than I did at my previous job last year but am working hard to earn more this year.
Back to Michele’s Office
So I’m sitting there silently freaking out because I’m wondering if I’m going to owe epic taxes. I watched her add: the services that I used for my business, my side hustles, my conference expenses. The numbers were flowing in a blur until she sat back and told me the number that I owed. Not too bad.
But I won’t make that same mistake again. I’ve already scheduled my meetings for each quarter already and will be filing my taxes each quarter on time from now on. I don’t need the stress of worrying about a ginormous tax bill next year. Also, when I didn’t file my taxes on time I felt like I was living a lie and that I was doing something that was out of alignment with my money related goals.
Filing Taxes
For the first time as a self-employed person has been an eye-opening experience. Now that I’m rebranding myself and switching to being an entrepreneur it’s especially important to me to manage my personal and business related expenses in a way that will allow money to flow in constantly.
I will be meeting with Michele in 2 weeks of file my Q2 taxes in a couple of weeks. I am thankful for every dollar that flows in and out of my life. I am thankful each time I send money to the Government (I don’t want to pay the Government tons of money!) But, I am thankful for the money that I’ve earned. I feel so grown up.
What Has Your Experience Been Filing Taxes as a
Self-Employed Person/Entrepreneur?
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Good times! It’s seriously the thing I will miss the least with being a freelancer. Glad it wasn’t too much of a shock for what you owe.
Nope, I owed less than what I thought I would so all was good. But, I add to my worksheet every week to keep the process simple. I haven’t found it too stressful other than waiting like an idiot to get them done.
It’s a lot of work keeping track of all the records but so worth it!
I try to keep things super organized and it’s amazing what needs to be reported.
I’m glad you will be paying quarterly this year. That’s definitely the best idea.
I’m glad too Cat-love just getting it done.
I really strongly dislike doing them! We try to have my husband pull out enough to cover my taxes so we don’t have to file quarterly.
I wish I could do that! I didn’t find it too difficult to deal with this time. But, I try to keep on it on a weekly basis.