Tax Strategies From a Veteran Freelancer Who’s Been Through It All

By Bethany Johnson, Contributor, on February 14, 2018

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You’ve heard the old adage: “Hindsight is 20/20.” As you build your business of one, you may sometimes wish you knew the lessons learned by freelancers who’ve done it all before. Too often, the advice out there is from some affiliate trying to sell you something, not a practitioner who’s actually been there and can look back with that clear 20/20 vision.

When you’re first navigating things like sales, contracts, operations, accounting and tax strategies, it’s nearly impossible to feel confident that you’re “doing it right.” Thankfully, other freelancers have learned it all the hard way, so you don’t have to.

For an honest peek behind the curtain, I caught up with veteran freelancer Chrissi Hernandez, an independent art director with a client roster full of awe-inspiring names like Sephora, Sony Pictures, thredUP and Ipsy. Here’s what she says she’d do differently, if she had to do it all over again.

How did you get started freelancing?

After seven years of full-time work, I decided to branch off and start freelancing for various companies when I moved from San Francisco to LA. I had a very lucky start when I was picked up by my previous employer, Sephora, to work remotely and independently.

How would you would recommend others get started?

I tend to err on the side of caution, so to others considering making the leap, I would say make sure you have at least one consistent client to begin, or three months’ pay in your savings account… minimum.

Is there anything you wish you would’ve known about business finances or tax strategies before you launched your freelance career?

There are so many things I wish I had known. Quarterly payments are very important to pay, especially if you don’t want to end up with a large bill at the end of the year. One thing I didn’t know was the distinction between state and federal taxes. IRS, FTP, California, Government, 1099, FEIN number… there were so many new terms that it quickly got confusing. If I were [talking to] my old self, I’d tell her to sit down with an accountant or another business owner to go over these terms so everything becomes more clear.

What’s something you can see in hindsight that you wouldn’t have possibly been able to know at the time?

One thing I always tell other people who are just starting out is to put away half of every paycheck. Hopefully, you’ll only end up having to pay 30 percent of your income in taxes, so if that’s the case, you just gave yourself a nice 20 percent bonus for the year.

Most of all: Track your write-offs. A new computer, lunch with a client, apps and supplies — these all add up. Make sure you’re tracking these things so you can subtract them from your total income at the end of the year.

In your experience, what’s the best way to make a big financial decision as a freelancer?

Whatever the decision may be, make sure you have a cushion of capital to fall back on.

Use a Veteran’s Hindsight to Enlighten Your Future

The only thing better than crystal clear hindsight is the helpful voice of someone who’s been there and can explain how to avoid the potential pitfalls of freelancing before you encounter them. And for me, Chrissi’s answers did exactly that. I thank her for her insight, and hope you gleaned as much from her advice as I did.

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