How to Prepare to File Your Taxes as a Virtual Assistant
February 5, 2019
Congratulations! If you’re reading this and wanting to learn how to file your taxes as a Virtual Assistant, that probably means that you made money as a Virtual Assistant in 2018 and that’s something to celebrate! Whether it was $1000 or $100,000, you made money, and that’s amazing! Now, here’s the question; what do you have to do with that money?
Chances are you probably were not filled as an employee under your client(s) that paid you in 2018, so that means that you have to file your taxes. (duh duh duhh…) Don’t panic; it’s not that scary. But there are a few things you should know to help prepare you for filling this year and to help you plan for next.
How is your business classified? Are you an LLC, a sole proprietorship, or maybe you haven’t filled your business in any form yet? Totally okay, just know how your business operates so you can inform your clients on how they and you will handle taxes for the year. Always confirm with your accountant before making any financial decisions (I am not a certified accountant am not able to provide accounting advice), but there’s a good chance you will file your taxes for your business as a 1099 employee.
Did you make more than $600 from each client? Good news, if you earned less than $600 from a specific client, you don’t need to worry about taxes for their payments. But, for any clients that paid you more than $600 you will have to pay taxes on that income.
Organize your business expenses… they’re tax deductible! Anything that you purchase specifically for business purposes can be deducted from your VA income! This means any subscription services (i.e., Canva, Buffer, Dropbox, GSuite, etc.), any technology (computers, phones, printers, etc.), and anything else purchased for your business (website hosting, domain names, desks, etc.) PLUS, you possibly can also deduct a portion of your mortgage/rent, utilities, and other monthly expenses that help you keep your business running. But, again, check with your accountant on what exact deductions you qualify for. Luckily, digital credit card statements and platforms like Freshbooks make this very easy.
Hire an accountant. Business taxes can get tricky, and you want to make sure you are maximizing your income and minimizing anything you owe. This may mean bringing in help. If you are not confident in your ability to file your taxes on your own, hire someone who is. You will not regret knowing that your taxes are being taken care of by a professional to minimize your risk of being audited.
In the future, set aside a portion of your VA income for taxes. A good rule of thumb is to set aside 25% of each invoice for taxes from the get-go. Pretend it’s exactly like being an employee of a business and taxes are taken out automatically. Open up a separate savings account and throw that 25% in there. Your accountant may even recommend that you pay quarterly taxes to lessen the blow at the end of the year. Remember, because you are self-employed you are required to pay the “self-employment tax” which is equivalent to the portion your employer would contribute, so it doubles your tax liability — all the more reason to maximize those deductions.
Taxes sound like a scary thing, and they certainly can be if you are not prepared. But if you think ahead, are organized, and hire good help; they can just be another part of being a business owner. No big deal.
Have you downloaded my FREE 31 Day Guide to Opening Your Work-at-Home Business? In it, we discuss how to set up your business and prepare for things like making money and taxes. CLICK HERE to download.