• My husband and I file married filing jointly. He has W-2 income. In this tax year I have part-time W-2 income plus one 1099 freelance income. Next tax year I expect to rely more on freelance work and may receive 3–4 different 1099s. Is there anything I should start doing now to better prepare for next year’s taxes? You should definitely start planning estimated payments for next year. If you wait until April and pay all of your taxes at once you will pay penalties and interest as well as taxes. When you finish preparing your return you will click on 'Other Tax Situations' at the top of the screen and the 'Estimated Tax Payments'. The system will ask a series of questions to figure out how much you should send in to cover next year's tax bill.
• For this tax year, are there any common deductions freelancers often miss that I should double-check before filing? In your first year there may be some expenses that you need like computer equipment and software subscriptions that you may not have in future years. As far as business expenses go the rule of thumb is that if you have to but it in order to do the job then it is a viable deduction.
• Some small business purchases (like office supplies) do not have receipts. For example, my bank statement may only show Target or Amazon without listing the items. Is it acceptable if I keep bank/credit card records plus my own notes about what the purchase was for? No. The IRS requires a receipt with a business purpose on it. In the case of your notes and a bank statement you are asking the IRS to take your word for what you spent and they do not do that.
• For the home office deduction, do I only need approximate home size and office size? If you are going to take the simplified (safe harbor) method that is all that you need. If you want to use actual expenses then you will also need all of the household expenses for the entire year. Actual expenses are deducted for the percentage of the house that is the home office.
• My freelance income next year may only be around $20k–$30k. At that level, is there any reason to consider LLC, S-Corp, or a Solo 401(k)? There is always a reason to consider it. But there are also reasons to say no. Turning your self-employment into an S-Corp can be a huge savings in taxes but it will add a ton of hassles in paperwork to your life.
• If I move to my husband’s employer health insurance instead of COBRA, would that make any difference for my freelancer taxes? You would not be deducting the health insurance costs, your husband would. So you would be paying less for insurance and you would be deducting less on your taxes. Sounds like a win to me.
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