Bonsai Launches Free Tax Calculator for US Freelancers
A freelancer is at once the boss, the employee, and the finance manager. But there’s one thing no one likes dealing with: taxes. Even when you have iron-clad freelance contracts, taxes can be a nuisance at best and overly complicated and time consuming at worst. One platform – Bonsai – is aiming to fix that.
Bonsai, a freelance business management platform boasting over 250,000 users, has just launched a new freelance tax calculator for US-based freelancers. The calculator provides an estimate of how much tax you might end up owing based on: your state, filing status, income levels, and business expenses.
“I’ve freelanced for many years, and self-employment taxes were always an area of confusion,” said Bonsai’s Head of Marketing, Madhav Bhandari, in an interview with AIThority.
Helping freelancers with self-employment taxes
In most states – and most countries outside of the US – freelancers are lumped in with “self-employed individuals.” This means they have to register their businesses as self-employed and handle taxes as such. Thankfully, this means access to all the same deductions as small businesses. Unfortunately, the web of deductions is incredibly complex. What supports you can access depends on both your state and your city, as different municipalities offer different support.
One thing that every freelancer can leverage to reduce their tax bill, though, is business expenses. Whenever you spend money legitimately to run your business, you can deduct that expense against your taxes. This web can also get complicated, so Bonsai launched a library of common self-employment tax deductions. At the top of the page, you’ll see a list of things that almost every freelancer can deduct. These range from set up expenses to ongoing subscriptions. At the bottom, you’ll see a list of types of freelancers – from makeup artists to software engineers – linking out to the common deductions for each type of work.
Avoiding the pitfalls of freelancing
According to one study, a common challenge freelancers face is not saving or withholding for taxes. Ideally, once you have a ballpark figure of how much tax you will need to pay, you can also begin to save so you don’t have a surprise bill.
Many of the other key challenges freelancers face revolve around payment. Freelancers say they have trouble ensuring on-time payment and many send invoices late or don’t have contracts before starting work. All of these challenges are also ones Bonsai says they can help with through their paid platform. However, you don’t want to pay for a platform to get this benefit. There are free ways to ensure clients pay on time, from freelance contract clauses to free platforms like Wave.
“As the year comes to an end and you start reflecting on 2020 and planning for 2021, we hope this gives freelancers some help and confidence in managing their finances,” said Bhandari.