Well, it is that time of year again…TAX TIME! Don’t you just love it? I am at least grateful that it falls in the dead of winter and early spring, rather than in the late spring or summer when the weather is good for being out and doing fun things. I would hate to have to do my taxes in July, when I would rather be at a pool or barbeque (pre-pandemic, of course).
My husband and I typically designate a Saturday in February or March to work on our taxes. Since I am self-employed and own a business, my part of the ordeal is to work on Schedule C, Schedule SE, and Schedule 1. All of these have to do with income and/or expenses which one had in one’s business for the year.
Once these three schedules are done and the numbers plugged into Form 1040, we are done, right? WRONG!
There is also the Maryland state return (based on the federal one) and, my favorite, the Maryland Department of Assessments and Taxation (DAT) forms. The latter have nothing to do with income taxes, but they are the biggest pain in the keister. They have to do with reporting your business’s gross sales (not difficult) and how much personal property the business owns and what the property is worth (difficult).
My most important piece of advice to a freelancer who is just starting out: Keep good records.
Don’t throw out those bank statements or receipts; if you are audited, you will have to show what you spent and on what. If you get bank statements online through email, don’t delete them. And learn basic Excel and make spreadsheets of your income (line by line) and expenses (also line by line). Making spreadsheets can actually be kind of fun if you color-code different lines or cells.
I wish you the best. Don’t worry…eventually you will finish all of your forms. Then sit back and relax with a nice mug of hot chocolate.