Calculating your taxes as a freelancer can be a daunting task. Often times we don't know exactly how much we will make come year end. If you overpay early in the year, it can leave you short on cash at the end, with no refund until the following year. What's a freelancer to do?
This was one of the major reasons I built
The obvious first problem here is that I'm not taking into account any expenses, which is easy enough to remedy by tracking and deducting those from my total income.
I'll add some expenses to my freelance practice and we can now see how this lays out for quarter one.
We can see a bit further into the future now but there's still a real risk we sign no contracts at the end of the year. Now we can see this and take a look at what our 12 month is instead of what it looks like at that point in time.
You can also see that come October we're going to need to begin dipping into our harvested profits to cover our ongoing expenses.
Ultimately, if we hold some cash back and use our 12-month net profit projection come June, we can cover the downside nicely should we hit a dry spell in terms of work. Otherwise we'd be forced to leverage credit cards and rely on a tax refund the following year to make up for the cash shortage.
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