April 15th, the deadline for filing taxes for Americans, is almost here. If you’re a freelance writer — especially if you do your own taxes like I do — it’s critical that you get all the deductions you can to lower your tax bill. Why? Because running an online business can be very low cost, which is one of the reasons many are so attracted to the profession. If you have a computer and an internet connection, you’re pretty much ready to go.
So, following are five things you probably didn’t know that can help you lower your tax bill — making the difference between owing (possibly a lot) and getting a smidgen of a refund.
1. PayPal Fees: Do you deduct these? Almost very time you receive a payment, PayPal deducts fees, which are mostly 2.9% + $.30 per transaction.
For international sales, the PayPal fee is 3.9%, plus a fixed fee based on currency received. FYI, PayPal’s fees can be less if you sell more.
Visit PayPal to learn more about their transaction fees, and don’t forget to add this column to your expenses sheet moving forward, OK?
2. Banking Fees: For example, let’s say you’re a travel writer and you go away and use an ATM that charges you fees for withdrawals. This is a legitimate, deductible expense — because you’re on assignment.
3. Recurring Fees: For example, I publish ebooks. So I use an ebook cover-making site to help me with the designs. The monthly fee for this site is $9, which comes out of my PayPal account every month. I may go for three or four months without using the site (because I also outsource some of my ebook covers), then two or three where I use it all the time.
My point? It’s easy to forget these expenses and if you have two, three or four accounts like this (eg, magazine subscriptions, software subscription sites, paid newsletter subscriptions, etc.), it can really add up to $400, $500 or more per year — that you could be deducting as legitimate expenses.
4. E-File: If you’re in danger of missing the deadline (which could cost you penalties and interest if you owe), consider e-filing your taxes. Why? Because returns filed in this manner tend to be processed faster.
5. Don’t File & Save Money! Did you know that if you are owed money my by the IRS (ie, are expecting a refund), that there’s no penalty for filling late? Well, it’s true! According to the CNN article, Owed a refund? There’s no penalty for filling late:
If you’re owed a refund and you don’t file your taxes by Tuesday, you won’t get hit with a penalty. This has always been the case, but many people don’t realize it. The IRS is chomping at the bit to get its tax revenue. It’s less concerned about doling out refunds to people who haven’t claimed them yet.
So if you have a deadline you’re trying to meet (where you make money), and don’t have time to file taxes (which costs you time), by all means — meet that deadline. If you’re owed money, the IRS is not going to penalize you if you file your taxes late (wish this applied to me!).
Happy filing, and if you’re going to file late and owe, here’s a great tax calculator for estimating what you should send in.