There is no clear cut way to make it in the freelancing world.
When I sold all of my stuff and started backpacking the world, I had to set fire to the safety net that my old lifestyle had provided me.
I’m 25 years old and a full time world traveler.
I spent my summer in Central America and the fall in Europe.
In six months I have visited ten countries.
I fund myself by working online from anywhere that I can get wifi connection.
As a writer, I use Upwork, the world’s largest online workplace to connect with new clients.
My main niches are in writing articles and revising website copy.
This is how I got my start as an online writer.
When I first started freelancing, all I saw was the dream.
I pictured airplanes, coastlines and big cities.
I didn’t think about the backend of essentially owning my own business.
Without thinking twice about it, tax season came about and made me realize that I had absolutely no idea what I was doing.
My taxes were no longer being conveniently taken out of each paycheck that I earned.
As a freelancer it’s the opposite, I’m in charge of paying.
Struggling through my first tax season as a digital nomad, I learned some valuable lessons that prepared me for next year.
1. Start paying quarterly taxes.
Instead of adding up everything you made that year, writing a check for 30% and sending it to the IRS, professional freelancers know that paying quarterly is the route to take.
Your quarterly taxes will be determined based off of your earnings the year before and your deadlines are:
April 15th, June 15th, September 15th and January 15th (of the next year).
Depending on if your income that year is more or less than the year before, you’ll either get a check or pay in to the IRS.
2. Take advantage of deductibles.
This year I bought a new computer, renewed my domain and hosting website services, paid for a gmail suite for my professional email address, and paid for two months at a co-working space while living in Croatia.
These are all tax deductible items.
To keep track of each of these e-receipts, I have a folder on my computer with screenshots of each transaction and an excel file with the dates of each transaction.
3. Keep track of your weekly earnings to figure out how much you are actually making.
If I make $100 on Upwork, I can automatically deduct 30% for taxes.
That $100 project is actually a $70 project.
Getting accommodated to this is massively important for obvious budgeting reasons.
I use an excel spreadsheet to track my weekly projects and earnings so that I’m aware of how much money is mine and how much belongs to the IRS.
Having an idea of what to expect from tax season as a freelancer is one of the major keys to success.
In hindsight, an article breaking down three essential tips for digital nomad’s in tax season would have been of massive value to me.
Learn from my mistakes and make sure to deduct everything you can, to stay organized and to pay quarterly instead of annually to avoid having to write a massive check come to tax season.