Taxes. It’s a scary word and rather nerve-wracking part of the year, that April 15 deadline. Reporting to the IRS as an independent contractor can be confusing. Some of your work may include withholding, which you will want to have opportunity to get refunded. Some of your work may not have any amount withheld, so how do you know what to pay in?
The best advice I was ever given as an independent contractor was to take 1/3 of all my earnings and put them in a separate bank account if taxes were not withheld. The highest tax bracket is 28% currently, so even if you hit the jackpot and become a Donald Trump type overnight, you won’t have to pay in more than 28% at the end of the year. Having a safety net in case you are one of the unfortunate individuals who owes the IRS come April 15 is a wise way to live. No stress . . . and if you come in at a lower tax bracket (and even if you don’t – 1/3 is 30% whereas the highest tax bracket is 28% -- that leaves you 2%), you’ll have money left over to splurge as a reward!
That’s the down side, but every cloud has a silver lining! The up side to taxes are the write-offs you can claim as an independent contractor. Keeping records is key here, though. You can’t write it off if you can’t prove it, so save receipts, log miles driven to castings and bookings, and keep all the paperwork in a shoe box for at least 7 years. (Ok, it might be several shoeboxes, but you can write the shoes off if you use them for work, so it’s a win-win!)