When you set out to be a freelancer or independent consultant, no one tells you that you’re really taking on a minimum of 5 jobs at once. You adopt the title of whatever skill or trade you’re plying (graphic designer, copywriter, web developer, etc.) but you also become your own marketer, content creator, administrative assistant, bookkeeper...you get the idea.
As a copywriter and brand strategist, I felt comfortable tackling the marketing side of things. But freelance bookkeeping was an entirely different story.
Taxes for Freelancers
Come tax season, I was a nervous wreck. I’d been keeping tabs on my earnings and some expenses with a rudimentary Google sheet but I hadn’t even considered potential write offs – let alone paying quarterly tax estimates.
It took days of scouring my bank accounts, reviewing transactions, and triple checking my math to get my taxes in order, and even then I wasn’t 100% confident in my calculations.
After all that stress, I was determined to find some tools that could translate the intricacies of accounting for independent contractors into plain English. I spent months testing out software and burning through free trials, but so many of the “solutions” I found just added more work to my plate.
I started using Lunafi as a beta tester in 2020 and overnight, it was like a huge weight had been lifted from my shoulders. What used to take me hours each month, I can now accomplish in minutes. Here’s why:
1. Classify Transactions & Create Rules
Once I synced up my bank account, Lunafi did all the hard work for me. All I had to do was classify my transactions as business or personal. Not only does it help me keep track of my business expenses, but the home dashboard displays what percent of my total spending is business related and how much profit I’ve earned to date
When Lunafi added the rules feature, it got even easier. With the click of a button I could flag all transactions from certain vendors so the app would categorize them accordingly. As someone who constantly forgets how many subscriptions I have at any given time, I can’t tell you how much time this feature has saved me!
2. Estimated Tax Liability
Before I started using Lunafi, I had no idea that paying quarterly tax estimates was even a thing. And once I found out it was, I had no concept of what I might make in a year and therefore, what I would owe each quarter.
Fortunately, Lunafi’s estimated tax liability makes it easy for me to see what I’ve owed historically, and what I can expect to pay based on my earnings each year. Plus, it even breaks those estimates down into social security, medicare, income, and 1099 taxes.
No more wild guesses or shots in the dark. I know where I stand financially, and how to budget for my future.
3. Tax Write Off Suggestions
It wasn’t until I started using Lunafi that I realized I was eligible for all kinds of tax deductions as a freelancer. Little did I know, I was missing out on the opportunity to write off things like internet bills, transaction fees, membership dues, even professional development and educational expenses!
Lunafi’s algorithm identifies certain types of transactions (ones that I would miss) and flags them as potential write offs. Then I can confirm and classify what kind of write off based on the categories the app suggests. The app even displays my estimated tax savings per transaction.
4. Business Spending Breakdown
I’m a very visual person so the mere idea of staring at numbers on a spreadsheet makes my eyes glaze over. That’s why I love how Lunafi translates all the important metrics into easy-to-read graphs and pie charts.
At a glance I can see where my business expenses are going, and gauge whether I need to cut back in certain areas. Like when my “office supplies” budget eats up over a quarter of my spending: I know I’ve gone a little (ok, a lot) overboard with the color coded folders and matching sticky notes…
5. Earnings by Client
One of the most important lessons I’ve learned as a freelancer is that you should never have all your eggs in one basket. Relying on one (or even a few) clients for the majority of your income makes an already risky career path, even riskier.
When all my earnings were in a mind-numbing Google sheet, it was hard for me to visualize how much of my monthly income each client accounted for. Lunafi lets me categorize earnings by client, so I can see exactly how much each client is bringing me, and when I need to start prospecting for new leads.
Overall, I would recommend Lunafi to any independent contractors who want to make tracking their finances and paying taxes less stressful. Whether you’re a seasoned freelancer or just starting out, the app can save you precious time so you can get back to doing the work you love.
Hillary Lyons, Writer
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