I quit my job to start freelancing. What’s going to change with my taxes?
First off, congratulations for taking the exciting (and terrifying) step of chasing your dream of doing freelancing!
Second, there are some things you will need to know about your finances and taxes. You will no longer have the luxury of your employer withholding your taxes for you. You have to set aside money for your taxes. And you have to pay estimated taxes each quarter by:
- April 15th for income earned in January through March
- June 15th for income earned in April and May
- September 15th for income earned in June through August
- January 15th (of the following year) for income earned in September through December
- You will also need to keep much more accurate records than you did when employed full-time.
We recommend you opening separate bank accounts to keep your taxes, businesses expenses and personal income separate from one another. This will make things much easier for you come tax time.
The hardest part of freelancing is budgeting your personal expenses on an irregular income, especially when you now have to factor taxes into that budget.