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Gig work requires careful budgeting and tax prep

Gig worker is the new name for freelancer. No matter what you call yourself, you and many in California enjoy the freedom and flexibility of the job classification. The work you do is an important part of the economy. Whether you freelance as a writer, designer, artist, IT support or other industry, you allow business owners and others to operate with a low overhead.

However, the advantage you provide for your employers may be exactly the drawbacks to your job. You have no health insurance or other benefits, no steady income and no real security. Your employer likely does not deduct taxes from your check either. Among the many challenges you face as a freelancer is the preparation of your taxes.

Freelancing and your budget

The work you do may come from a variety of sources, so part of the problem with paying your taxes may simply be keeping your income and expenses in order. There are numerous apps available to keep your business and personal budgets organized, including some that help you create invoices and keep track of your deadlines. Ultimately, it is your responsibility to ensure you are tallying your income accurately and paying the required taxes.

Maintaining a careful budget is essential for freelancers since it is not always possible to rely on consistent income. Having a plan for lean periods is important. Some financial experts recommend having up to six months of income stashed away for emergencies and future expenses. If you are able, you may take the advice of financial advisers who suggest freelancers maintain a lifestyle that requires only half of what they earn.

Freelancing and your taxes

When planning your budget, you should remember that your expenditures and savings is tallied after you pay your taxes. In general, if you are self-employed and your employer is not deducting taxes from your pay, you should probably be paying estimated taxes quarterly. The IRS website or your tax attorney can advise you how to meet this obligation. You must also pay a self-employment tax which covers your legal contribution to Social Security and Medicare, even if you are already collecting these benefits.

While the number of freelancers in many industries continues to grow, you may still find it easier to obtain work to keep you busy and solvent. However, if you struggle understanding how gig work affects your tax obligations, you would be wise to seek professional help.

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