Tag Archives: self-employment

Tax-time thoughts, 2019 edition

Posted on by
3

It looks like we didn’t get crushed by taxes this year, even if we did owe money to the IRS. That’s nice, since we skipped the one step we were supposed to take to avoid an April 15 financial hit.

2018 Form 1040I knew going into filing season that last year’s tax changes (I prefer not to call them “reform,” as that suggests progress unsupported by the evidence) would slash our deductions. In the bargain, I’d get a 20 percent break on my self-employment income, what the Tax Cuts and Jobs Act of 2017 calls the Qualified Business Income Deduction; our rates would drop somewhat; and we’d lose personal exemptions but gain a child tax credit.

Which ones would outweigh the others? It appears that the rate cuts and the self-employment break made the bigger difference, leaving us paying just over 20 percent on our taxable income compared to the 24 percent we paid on a lower taxable income last year. And that’s even though my spouse did not adjust her tax withholding as recommended.

But without the self-employment deduction–be advised that tax accounting is not exactly one of my core competencies–it looks like we would have paid a higher rate.

(No, I won’t provide raw totals. I also use verbs like “appears” because once again, I filed for an extension: I caught some dumb oversights in last year’s return that should slightly lower our bill, but I won’t finish filing until that amended return clears.)

After spending seven years dealing with a tax code that treats self-employment as something to be fined, it’s nice to get a break for it instead. But I also know that the tax code continues to favor investment income over money made from actual work, I continue to resent how it’s gamed by people with the really good accountants and tax lawyers, and I can’t ignore that the tax savings delivered by this rushed bill are paid for by running up the national debt and having the lower rates expire after 2025.

Sorry, politicians: You’re not going to be able to bribe me this way. You know what sort of new tax regime would get my interest? One that didn’t keep me wondering how much we’d owe until I’d pounded through hours of punching numbers into a tax-prep program.

Advertisement

Here’s the Google spreadsheet I use to track my expenses

Posted on by
17

A friend of mine started freelancing at the end of last year, so I decided to give him a boring but useful present: a blank copy of the Google Docs spreadsheet I use to track my expenses.

old calculatorA systematic, easily smartphone-accessible way to record the costs of doing business–organized so you can copy the year-end totals into your Schedule C tax form–is exactly the thing I needed when I started freelancing almost eight years ago. Instead, I had to survive some excruciatingly stupid accounting practices and eventually thumb-wrestle my way to marginal competence.

I was glad to give my friend a boost past that phase, and now I want to do the same for any self-employed types reading this. Here you go: Make a copy of this template (go to the File menu and select “Make a copy…”) to your Google account and get to work.

This template is organized by types of expense, with the biggest categories in my case–travel and meals and entertainment–getting their own sheets. When possible, I’ve aligned types of costs with TurboTax’s vocabulary to reduce springtime tax-prep confusion. In addition, you’ll see a box in which you can plug in the relevant numbers for a home-office deduction, but I recognize that not every 1099-income type will claim that.

I’ve also left comments throughout the spreadsheet (look for the orange triangle at the upper-right corner of a cell) explaining what goes where. If you see ways to simplify this or if you think the spreadsheet is missing an important angle, please let me know in an e-mail or a comment below this post.

I hope this helps. Good luck with your business!

Three ways to track freelance income–none of which may be right

Posted on by
1

My work for this year isn’t done, but my income almost is. One client’s payment arrived today (having that happen less than three weeks after invoicing ranks as a Christmas miracle), another has told me to expect a direct deposit next week, and that’s all the positive cash flow I’m expecting for 2018.

Nearing that taxation-and-accounting finish line has me thinking once again of how I try to keep track of what I’m making throughout the year. I have three different models for this, and each can be wrong in their own ways.

• What I file in a month: This approach has has the advantage of focusing on the one thing I can control the most. But a lot can happen after I file my copy, by which I mean it can go through a prolonged edit that pushes back completion of the work by weeks.

Or by months: An editor’s departure at one site earlier this year left a post collecting dust for several weeks until one of his now-overworked colleagues could tend to it between other tasks.

• What I invoice in a month: Sending in the form itemizing your work and requesting payment has a pleasing finality, but not everybody sends the direct deposit or the check on the same timetable. Thirty days is typical, but USA Today and Wirecutter usually beat that number by at least a couple of weeks (having two of America’s largest newspapers turn around a payment that quickly continues to amaze me). Sometimes the same client’s payments arrive on wildly varying schedules for no apparent reason.

Last year, I also had a client reject an invoice because of a glitch with the bank deposit information I’d provided, and because the parent firm of this site picked an invoicing system for its fundamental meanness, I had to start the invoicing process for that story from scratch. Fortunately, I’ve not yet had to send more than a few nagging e-mails to get a invoice paid out, which is not a given in this line of work.

• What I get paid in a month: There’s no arguing with the numbers on a bank statement, but this can often be a fake metric because it reflects work done months later. And for every month where a round of overdue payments finally land and make me look like a business genius, there’s going to be another where a couple of invoices get processed just late enough to have that money hit my account not on the 29th or the 30th but on the 1st or the 2nd of the following month.

As it happens, it looks like I’ll get a reasonably large deposit from one site early next month. I’ll try not to let that cash flow get to my head… because I really thought I would have seen a chunk of that change by now.

Should I be on Patreon?

Posted on by
3

I’m not a millennial and I don’t have any tattoos or piercings, so I would appear to be wildly ineligible for Patreon.

Yet I’m still curious about using that crowdfunding site to give people a chance to underwrite my work if they feel so inspired. I can’t tell if that is me being entrepreneurial or vain, so I’m writing this post to try to untangle my thoughts.

I first encountered Patreon when founder Jack Conte gave an exuberant presentation on the site’s backstory at 2013’s XOXO conference. (His talk rambles a bit–which is fine if you enjoy dancing robots–but overall merits 24 minutes of your time.) I decided that letting fans pledge as little as a dollar or two a month to indie creatives was a smart response to declining ad rates and the overall horribleness of the content industry. And then I thought little more about that concept until I started seeing more people and sites I know pop up on Patreon.

You can sum up the Patreon proposition as “Kickstarter over time.” Instead of asking for support for a particular project, creators invite fans to kick in a defined sum each month to support their ongoing efforts–and can also offer extra rewards for contributions above a certain level.

For example, my friend Glenn Fleishman‘s typographic-centric pitch includes exclusive or early access to his articles, science-minded podcaster Rose Eveleth offers a patrons-only newsletter, and the Arlington news site ARLNow.com touts a private Facebook group for more-generous contributors.

After conversations with a few Patreon fans at XOXO this September, I e-mailed Glenn to ask how that was working for him.

His two bits of advice: Find something you can provide to Patreon contributors that they couldn’t get elsewhere, and show what their support lets you do that you couldn’t accomplish otherwise.

I think I have a good answer for that first item: my time. As most people who have e-mailed me can attest, getting my attention when I’m constantly changing channels between stories and clients is… problematic. If I could offer something like a private Slack group or some other closed forum, I’d like to think that would appeal to people who miss the Web chats I did at the Post. (I miss them too.)

The second thing, though, is harder to answer. I think I do a decent job of selling enough stories from each out-of-town event to cover my travel costs… although conferences like the Online News Association’s annual gathering routinely defy my attempts to monetize them. Would that be enough of a what-you-helped-me-do story?

My other concerns: I wouldn’t have enough time to tend a Patreon page (note that I’m typing this near 10 p.m. on a Saturday); nobody would support it; worst of all, nobody would support it, and outsiders would then point and laugh.

At the same time, I like the idea of generating another stream of income, even if it only underwrites one trip a year. Getting acquainted with the inside of a crowdfunding platform seems like an overdue to-do item for me. And the last few months have made me increasingly uneasy about relying on my Facebook page for occupational banter with readers.

Having spent this much time musing about crowdfunding, I might as well crowdsource part of this decision. Please take the poll below, and if you have suggestions for what you’d want me to do at Patreon or another crowdfunding platform, please share them in the comments.

 

Playing hooky for home openers

Posted on by
5

I watched the Nationals lose a winnable baseball game Thursday. I’ve done that a lot since 2005, but this 8-2 defeat wasn’t just any home game. It was the Nats’ home opener–as far as I can figure out, the 13th that I’ve seen in person, starting with our team’s debut at RFK in 2005.

(The exception was 2007. According to an e-mail I sent to my wife, I listened to the game on the radio from home.)

That also makes this spring pastime one of the few consistent examples of me taking advantage of the flexible scheduling that I should theoretically enjoy as a work-from-home freelancer.

As in: When I wandered into this lifestyle, I had delusions of being able to devote the occasional morning or afternoon to a movie or a museum. Nope!

The reality has been one of compressed chores. My schedule affords enough idle time to let me get in some gardening or expedite a Costco run, but tearing myself away from other obligations for a few hours in a row seems impossible… except for this one rite of spring. I should not complain about that, even when the game in question has us getting lit up by the Mets.

Self-employment is easier if you’re not at the mercy of health-insurance companies

Posted on by
2

I am thankful every day that my wife has a good job that includes affordable health insurance for our family. But seeing the Republican Party attempt to demolish the Affordable Care Act over the past few months has made me even more appreciative of being a kept man.

For as long as I’ve been self-employed, I’ve been able to tell myself that if my wife’s job ever went away, the ACA would give us a fair shot at keeping health insurance for the three of us–even today, the rates I see quoted at HealthCare.gov remain reasonable. Meanwhile, not having to worry about exceeding lifetime coverage caps (my friend Kate Washington’s testimony about the costs of her husband Brad’s treatments for cancer are essential reading) or being judged to have a pre-existing condition takes a lot of anxiety off my mind.

Most of the GOP’s proposed replacements for the ACA would have taken a hammer to some if not all of those protections. It’s possible that my wife’s premiums would have dropped as a result. But we don’t want to trim that bill at the cost of screwing over other people.

Like, for example, self-employed friends who get their coverages on ACA exchanges. Tom Bridge and his wife Tiffany each run tech consultancies in D.C., and without the law’s protection they’d be looking at vastly higher coverage for themselves and their son. He’s tweeted often and well about how this product of the Democratic Party has allowed him to build a business.

Friday morning’s Senate defeat (thanks, Senators Collins, McCain and Murkowski and all 48 of their Democratic colleagues) against the latest in a long line of ACA-gutting bills drafted in secret and in haste should ease the existential dread they and many others have been feeling.

(President Trump being President Trump, he won’t shut up on Twitter about how the GOP should keep trying to kill “Obamacare” despite its unbroken record of failure so far. He’s the Black Knight of American politics on this subject.)

It does not, however, end the need to fix what’s wrong with the ACA in some markets. Another freelancer friend, Seattle-based tech writer Glenn Fleishman, has seen his costs climb to “ridiculous” levels–as in $20,000 this year. He’s now seeking full-time employment to escape that.

Now would be a great time for the Republican Party to accept that Americans have decided health insurance shouldn’t be left as a privilege, then bring some business smarts towards crafting the most efficient, choice-driven way to meet that goal. Since most other industrialized countries achieved universal coverage long ago, there’s a huge variety of ideas for them to steal, and which Republicans could have learned from over the past seven years instead of repeatedly staging stunt votes against the ACA.

The party that constantly says it speaks for entrepreneurs should be able to sell this as making it easier for people to start a business and create jobs. Or the GOP can continue to try to tear down this part of President Obama’s legacy, all so the self-employed can once again be “free” to run into the embrace of a large corporation if they don’t want to have to worry about getting sick.