The end of the year is a crucial time for organizing your finances and assessing the state of your work. Despite the holiday rush, December is the perfect time for reflection on the past year and planning for the year to come. On top of the regular planning, reviewing, and other things freelancers should do, there are also the tax implications. As the year ends, your expense and revenue numbers for the year reach their final totals and set the stage for your income tax return.
There’s a lot at stake. So carve out time to work on these tasks for your freelance work before the end of the year and set yourself up for a successful 2022 by completing these six things freelancers should do by the end of the year.
6 Things Freelancers Should Do By the End of the Year
1. Check in with the Goals You Set at the Beginning of the Year
It’s easy to get busy. There’s always another client emergency, another pressing task, and another urgent project.
However, if you’re only reacting to challenges in the moment, you don’t have a chance to step back and consider longer-term patterns.
You need to take the time to look at how your hustle has progressed overall. Something freelancers should do is ask themselves the following questions:
What goals have you set? What progress have you made in achieving them?
Take stock of how your freelance work is going in terms of your vision and with that in mind, you can consider what larger changes you may need to make in planning and direction.
2. Review Your Rates
When’s the last time you adjusted your prices? The end of the year is a perfect time to look at your cost structure. Reflect on whether or not your rates accurately portray the value that you bring to your clients.
Are you under or over-priced compared to your competitors? Do customers remark on the price one way or another in reviews? Are you getting enough cash flow with current prices? You might decide you’re better off without any changes. However, if you think a rate adjustment is in order, this is the time to do it.
A lack of planning or forethought around this issue can lead to some serious issues. The last thing you want to do is find yourself forced to change prices suddenly and surprise clients with it. Reviewing your rates at the end of the year gives you a chance to phase in any rate adjustments on a reasonable timeline and give your clients a heads up.
3. Set Aside Money for Retirement
Retirement savings contributions are an opportunity for valuable tax deductions for small business owners. Every year the IRS allows you to deduct retirement account contributions directly from your taxable income up to a set amount.
While you might not find yourself considering your tax situation in detail until 2022, this is a time-sensitive opportunity. If you want to get the maximum use of these contributions on your 2021 tax return, then you need to max out your possible contributions by April 15, 2022.
4. Set Goals for 2022
As you approach the end of the year, it’s time to look ahead to the year to come! This should be a natural product of your thinking as you take stock of your finances. Where are you, and where do you want to be?
Set concrete and achievable goals for you to work towards in the new year. This will give you a clear sense of direction and focus for the year to come. What kind of work will move you closer to your goals, and what sorts of jobs are just distracting you from what you really want to do?
5. Update Your Website and Portfolio
Another important thing freelancers should do is revisit their web presence and marketing campaigns. Instead of making do with an old or outdated platform, consider what you can do to modernize your site and make it more accessible.
If you depend on a portfolio to find new business, take some time to review it and update it with some of your more recent work. It’s hard to budget for marketing as a small business, as money tends to be tight already, but a small investment can go a long way when it comes to a professional website or other marketing efforts.
6. Prepare for Tax Season
It hopefully goes without saying, but you shouldn’t wait until the spring to start preparing your tax return. The last weeks of 2021 are your final chance to directly impact your income and expenses for the year’s tax return.
You can prepare for a happier and easier tax season in 2022 by reviewing your bookkeeping now. Make sure your records are complete and thorough and start hunting down receipts for business expenses, especially large purchases.
Don’t forget to check in on your estimated quarterly taxes. Have you paid enough into the system during the year already? You should be paying your income taxes in quarterly estimated payments, and if you’ve fallen behind you should make those payments now.
How a Tax Professional Can Help Freelancers
Handling your finances and tax obligations can get complicated, but a tax accountant can help you navigate all of this and plan for growth and success.
Visiting with an accountant in the winter, as opposed to waiting until April, can help improve your savings on income taxes and make the entire tax process more efficient and stress-free come 2022 as well!
There are a lot of things freelancers should do before the tax year is over that will affect income tax returns. A professional from 1-800Accountant can guide you through it. You’re putting in the work every week keeping the hustle going. Get support from another professional and make sure you don’t lose money to taxes simply because you weren’t informed.