Well, sometimes it is. But most of the time, it’s cabin fever, caffeine withdrawal, fickle cash flows, and fierce competition for clients.
When you boil it down, being your own boss is really hard work — and no time is that more apparent than during tax season.
Compared to those with a typical 9-to-5 job, freelancers, independent contractors, and other self-employed workers face a unique set of challenges when it comes to filing an annual return. For one thing, you need to maintain year-round business records that are separate from your personal ones to make sure you’re organized once tax season rolls around. You’re also responsible for making and keeping track of estimated tax payments(Opens in a new tab) each quarter, since the money isn’t automatically deducted from your paychecks throughout the year.
Perhaps most frustratingly, instead of getting a tax refund like the 9-to-5 crowd, you may actually need to cough up extra money to cover the year’s taxes in case those estimated payments were lower than needed. (You might even be penalized(Opens in a new tab) if you neglected to pay them altogether.)
Oh, and don’t forget about the whopping 15.3% federal self-employment tax(Opens in a new tab) you’re required to pay if you earned at least $400(Opens in a new tab) from your freelance work. Sure, it goes toward Social Security and Medicare which is cool for Future You — probably maybe?(Opens in a new tab) — but not so fun for Current You.
If your head isn’t already swirling from all that tax talk, consider the fact that a QuickBooks survey(Opens in a new tab) of 500 freelancers found that doing one’s taxes is among the most difficult challenges facing modern self-employed workers. It’s an obnoxious, tedious ordeal — so obnoxious and tedious, in fact, that more than a third of freelancers don’t even bother paying taxes, according to the same poll.
Since tax evasion is sort of a felony, filing your return every year is in your best interest. However, simply filing your taxes is not enough. If you try to figure it all out on your own, you could still be hit with costly penalties and interest if you make a mistake. On the other hand, you could always go to a CPA and have them take care of your income tax return for you, but their fees could burn a hole in your pocket, too.
For a happy medium between the two, consider picking up some tax software.
What is tax software?
Tax software is a type of software program that’s designed to guide users through the process of preparing and filing their returns, helping them comply with tax laws while identifying any deductions and credits that may be available. Essentially, it’s software that makes it less taxing to do your own taxes.
Back in the day, tax software came in the form of a CD-ROM that could be downloaded to your desktop computer. (How retro.) Nowadays, you can just download a program from a trusted tax prep company’s website. Or, even better, some tax preparation tools are available completely online or via mobile app for maximum convenience.
What should you look for in a tax software program?
“Freelancer” is synonymous with “self-employed business owner” in the eyes of the IRS (more specifically “sole proprietor(Opens in a new tab)“), so you’ll be reporting your business income and expenses on a Schedule C(Opens in a new tab) and your self-employment tax on a Schedule SE(Opens in a new tab); include both with your Form 1040(Opens in a new tab), the standard individual tax filing form. The tax software you use will definitely need to support that paperwork along with Form 1099-NEC(Opens in a new tab), the non-employee income document you get from your clients instead of a W-2. You may also receive a Form 1099-K(Opens in a new tab) from a third-party payment network like Venmo or PayPal if your client(s) paid you at least $600 that way.
Other good-to-have features include: