Tax Planning for New Freelancers: First Year Guide

Starting your freelance career? Here's everything you need to know about taxes in your first year.

Getting Started

As a new freelancer, you'll need to understand:

• How to report freelance income
• What expenses you can deduct
• When to make estimated tax payments
• How to set up proper record keeping

First Steps

1. Get an EIN (Optional but Recommended)

• Not required for sole proprietors
• Can use your SSN
• EIN provides additional privacy

2. Set Up Separate Accounts

• Business checking account
• Business credit card
• Makes record keeping much easier

3. Choose Your Business Structure

• Most start as sole proprietors
• Can form LLC later if needed
• Consider S-Corp as income grows

Income Reporting

• Report all freelance income on Schedule C
• Include income from all clients
• Report even if you don't receive a 1099
• Cash payments must be reported

First-Year Deductions

Startup Costs:

• Up to $5,000 can be deducted in first year
• Remaining costs amortized over 15 years

Common First-Year Expenses:

• Equipment and software
• Home office setup
• Professional development
• Marketing and website
• Business licenses

Estimated Tax Payments

• Required if you'll owe $1,000+ in tax
• Start making payments in your first profitable quarter
• Use safe harbor method (100% of prior year tax) if this is your first year

Record Keeping

Start good habits from day one:

• Track all income
• Save all receipts
• Log business mileage
• Separate business and personal expenses

Common First-Year Mistakes

• Not tracking expenses from the start
• Mixing personal and business expenses
• Forgetting to make estimated payments
• Not reporting all income
• Missing startup cost deductions

Planning for Year Two

• Review what worked and what didn't
• Adjust estimated payments based on actual income
• Consider business structure changes
• Plan for larger deductions (equipment, etc.)

How FileJoy Helps

FileJoy is perfect for new freelancers. We guide you through your first year, help you track everything, and ensure you're maximizing deductions while staying compliant.

Next Steps

1. Set up your business accounts
2. Start tracking income and expenses immediately
3. Calculate your estimated tax payments
4. Use FileJoy to stay organized all year

Your first year sets the foundation for future success. Start right, and tax time will be much easier.