What Freelancers Most Often Get Wrong
Paying tax on money you have already spent
The most expensive habit is not tracking expenses. Self-employment tax, income tax, the qualified business income deduction and your retirement contribution room all key off net profit, not revenue. Every deductible cost you fail to record inflates all four. Software, equipment, a share of your phone and internet, professional insurance, mileage, courses — none of it counts unless you wrote it down.
Leaving the retirement deduction unused
A solo 401(k) or SEP-IRA lets a self-employed person shelter far more than an ordinary IRA, and the contribution reduces income tax in the year you make it. Freelancers routinely skip it because it feels like locking money away, then pay tax on income they could have deferred. It does not reduce self-employment tax — that is charged on profit before the contribution — but the income tax saving is real.
Treating the tax set-aside as available money
Money owed in tax is not income; it is money held on someone else's behalf. Left in a current account it reads as spendable balance and gets spent, and the shortfall arrives with an underpayment penalty attached. Moving it out on the day a client pays is the single highest-leverage habit in freelance finance, and it costs nothing.
Frequently Asked Questions
Is this a substitute for an accountant?
No. It is a prompt to look at things you may not have considered, not a review of your position. It cannot see your return, your state, your entity type or your history. An hour with an accountant who works with freelancers will find things no questionnaire can.
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