Say you have been freelancing for a while, and thanks to your hard work, you are now making more money as a freelancer than you ever did in your entire life.

Well, first off, congrats! However, sometimes when you make more money, more problems can lurk around the corner.

The main problem is higher taxes.

So how do you stay current with all the tax bills you must pay as you continue making more money? That’s what we will discuss in this blog post.

Tip#1: Open a savings account

Open a savings account just for paying taxes. This is by far one of the simplest ways to budget for your upcoming tax payments.

For those who want to keep things simple, a good rule of thumb is to set aside 25% to 30% of your taxable income to pay for both quarterly taxes.

As you know, as a freelancer, you must budget for both income tax and FICA tax, which is why 30% is often the recommended percentage for you to save.

Tip#2: Use accounting software

Depending on your income bracket and expenses, you may not have to set aside up to 30% of your income for taxes.

Using accounting software is a good way to track how much you owe in taxes.

You can use accounting software for invoicing customers, handling your billing needs, and calculating how much you owe in taxes.

It can also generate helpful financial reports that you can use to help your business grow without any financial hiccups.

Tip#3: Keep Track Of Your Expenses

As a freelancer, you will never have to pay 30% of your total income on taxes because you can deduct business expenses.

You can subtract your business expenses from your income using the Schedule C form. 

However, to use this form correctly, you must keep track of your business’s expenses throughout the year.

This includes travel expenses, office supplies, car mileage, business meals, internet, and phone services.

I want you to take a moment and look around at all the devices you have in your work office. 

Suppose you use these devices to generate income for your business. 

In that case, it can be considered a necessary business expense that you can deduct using the Schedule C form.

Tip#4: Fee Forgiveness

Every freelancer makes a mistake now and then.

If you don’t pay your quarterly taxes on time, or if you don’t pay enough estimated taxes, the IRS will begin to hit you with tax penalties.

However, suppose you are normally in good standing with the IRS and never miss your tax payments. 

Well, in that perfect scenario, the IRS can give you an administrative waiver.

This waiver provides relief from specific penalties under certain conditions. One of those conditions is it’s your first time getting hit with a late fee (also referred to as “First Time Abate”)

Depending on the kind of penalty you receive, you can call the IRS at their toll-free number to request this administrative waiver.

However, sometimes you might have to request the waiver in writing using Form 843, Claim for Refund and Request for Abatement.

One more thing…

If this isn’t your first time receiving a late fee from the IRS, you can still request a fee waiver. You will need to provide a reasonable cause as to why you deserve to get your fees waived.

This may be due to a natural disaster, inability to get records, death, serious illness, or system issues that delayed your electronic payment from coming through on time.

Summary

In short, you can budget for rising taxes in various ways as a freelancer. For example, you can use tax software, use the 25%-30% rule, or if things get too difficult, you can hire an accountant.

That said, if you miss a tax payment, there might be a chance that you can get a fee waived by calling the IRS. Note that fee waivers are handed out on a case-by-case basis.