If making oodles of income through your freelance copywriting business is the goal, YOU DO YOU, my talented and ambitious friends. Deliver quality and get paid what you deserve for your services.
Fly high and amen.
Not too high, though. Because April is coming. Tax season. And among the many tax tips for copywriters floating around out there, I’d like spend a moment on estimated payments, the last thing you’re thinking about when the business first starts rolling in (and the first thing to crush your soul when your business taxes come due).
Like a Maury Povich “Out of Control Teens” episode, but for a copywriter
Quick story: I’m sitting across from my accountant after my first year spent piecing together various copywriting projects. Slipshod, and without much of a plan, I inched along, eventually winning steady work.
My side hustle was born.
It’s April (my birth month, coincidentally), and the taxman seems to understand the creature before him: what an unprepared little thing, hungover and visibly apathetic about “the whole filing taxes thing.”
“I can’t tell you how many new businesses do knockout sales year one, only to walk in here and find out they have a massive tax burden, payable immediately, that they can’t afford. A lot of them end up closing shop.”
An hour later, I walked out that door and submitted my registration to do business in San Diego County, marked my calendar in quarterly increments with big block letters reading MAKE ESTIMATED PAYMENT.
What are estimated payments?
Put briefly, estimated payments are payments that business owners make, on a recurring basis, to our good friends at the Internal Revenue Service (IRS). Typically, these payments are approximated based on the previous year of taxable income, or projections for the year upcoming.
Why you need to make estimated payments
Would you rather pay $1,000 four times throughout the year, or have to pay $4,000 all together come April? $10,000, or $40,000. What if you had stellar year and your taxable freelance income is far greater than you expected?
You could find yourself in a really bad position, facing a tax burden that could sink your freelance copywriting business and put you into time-halting, nerve-gripping debt.
Okay, back to my taxman. Fast forward to April 2018. I’d just completed my second full year of (earnest) freelance writing. I came to my accountant with a clear head this time. His computer machine told him I’d made estimated payments throughout 2017, more or less on time. He took it like a matter of course—you know, something every professional knows to do (and routinely does).
Consequently, my tax burden was far less, and I was able to live another day as a bonafide copywriter.
For me, it was a small triumph in the land of learn-on-the-fly copywriters (of which I’m a longtime resident). Without that tiny Napoleonic feat, I might have suffered the same fate my accountant had warned me about the year previous.
I might be making monthly payments on my outstanding tax debt, instead of working toward sustained growth.