We wanted to get to know Kajli Prince (NAIWE’s Tax Expert) better, so last month we sat down with him. Here is what he shared with us.

We hear that freelancers may be eligible for the Payment Protection Program (PPP). What are the qualifications that freelancers need to meet?

The main qualification for PPP is that the business has less than 500 employees (i.e., small businesses). These loans can be forgiven if the borrower spends a minimum percentage of proceeds on payroll costs within a specified time frame called the “covered period.”

 

Regarding a PPP loan, how do freelancers determine if we should use 8 weeks or 24 weeks for calculating loan forgiveness?

The covered period is either 8 or 24 weeks, depending on when the loan was assigned a loan number. Before June 5th, 2020, the covered period was 8 weeks. After June 5th the covered period was extended to 24 weeks. Borrowers who received their loan before June 5th may keep their original 8-week covered period or apply the new 24-week covered period. Generally, the 24-week covered period is a better option.

 

What is the rule of thumb for how much a freelancer should/can save for retirement?

My simple Rule of Thumb for retirement is: save as much as you can. So, you AsQ, “What small business retirement instruments are available to me and how much can I save with them?” Great question. Here are the big ones:

• 401(k)/403(b): $19,500 (under 50 years of age) and $26,000 (50 years of age and over)
• SIMPLE: $13,500 (under 50 years of age) and $16,500 (50 years of age and over)
• IRA, Traditional and Roth: $6,000 (under 50 years of age) and $7,000 (50 years of age and over)

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2020 was a year full of dramatic stimulus efforts intended to relieve huge financial stresses felt by most Americans. It seems that everyone is hopeful for 2021, but huge questions still loom large as to what happens next, especially with a new administration on the horizon. Kajli Prince will share the 21 questions he is asked most frequently about what to expect in 2021. The topics range from small business loans (and loan forgiveness) to retirement contributions/distributions/deductions, child & dependent care expenses, working virtually, etc. These 21 answers are intended to enlighten viewers as well as provoke further Q&A.

You can join in this conversation on February 25, at 7 pm eastern, when NAIWE will host a discussion on figurative language. The cost for NAIWE members is only $10! Non-members can join for $30. Register today!

We wanted to get to know Kajli Prince (NAIWE’s Tax Expert) better, so last month we sat down with him. Here is what he shared with us.

For those of us who are putting funds in traditional or Roth IRAs to fund our retirement, the ages 50, 55, 59 1/2, and 72 may have implications for our taxes. Please explain the implications as they relate to taxes for freelancers.

There are really only three relevant ages, with respect to individual retirement accounts, i.e., traditional and Roth IRAs: 50, 59 1/2, and 72. Further, these ages are relevant as pertains to contributions (limits) and distributions.

Individual Retirement Account

Contributions (for 2019 and 2020)

Under age 50 = $6,000

Age 50 and older = $6,000.00 + $1,000.00 catch-up

Note: For a SEP IRA (for self-employed persons) = 20% of net self-employment (SE) income after one-half SE tax deduction, up to $57,00.00. So basically, 20% of the same number the qualified business income deduction is calculated from.

 

Distributions (for 2019 and 2020)

Under age 59 1/2, distributions (withdrawals) are subject to an additional 10% tax. And if you participate in traditional IRA (not a Roth) and are 70 1/2 years old in 2019 you must take your first required minimum distribution (RMD) by April 1, 2020. If you reach age 70 1/2 in 2020 or later you must take your first RMD by April 1 of the year after you reach 72.

 

There is no particular significance to age 55. Although, it is a good age to consider your current tax rate and the type of IRA you are making contributions to.

 

For self-employed individuals, what is considered proof of income for tax purposes?

Documentation as proof of income can be very broad for self-employed individuals. For example, you can record the fact that you paid for goods or services on a napkin while doing a business transaction in a bar. At the end of the day, you just have to be able to show documentation for whatever income and expenses you are reporting on your tax return.

 

When preparing tax returns for freelancers, what deductions have you seen are the most overlooked?

I would say the home-office deduction. But I think a close second would be retirement tax shelters and credits. I will go into more detail during the webinar, and for now I will say self-employed individuals definitely benefit from some pretty sweet perks.

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For those of you who are putting funds in traditional or Roth IRAs to fund your retirement, the ages 50, 55, 59 1/2, and 72 have implications for your taxes. There are limitations when it comes to IRAs whether it is a Traditional or a Roth. The various limitations have to do with income, whether or not you participate in your employer’s retirement account, your filing status, and your age.

You can join in this conversation on March 27, at 7 pm eastern, when NAIWE will host a discussion on identifying and managing difficult freelance clients. The cost for NAIWE members is only $10! Non-members can join for $30. Register today!

We wanted to get to know Kajli Prince (NAIWE’s Tax Expert) better, so last month we sat down with him. Here is what he shared with us.

What do you feel is one of the most beneficial pieces of tax advice you have given? Why?

Have multiple streams of income. Often, having one stream of income is not sufficient to meet both current and future financial needs. Future needs include retirement, i.e., how much you think you may need to retire and how you plan on getting to that number.

 

Are marketing expenses deductible?

Yes. Generally speaking, the government allows freelancers to deduct marketing expenses that help bring in new customers and keep existing clientele.

 

Is there a checklist to help freelancers avoid overlooking tax credits?

Yes, there are checklists. However, I find that the best guide to use is a Schedule C (Form 1040). Part II of the Schedule C lists the expenses that a self-employed individual (freelancer, etc.) typically claims.

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It’s tax time! Are you ready? Learn about relevant credits and deductions that apply to independent writers and freelance editors, with a focus on the new deduction: Qualified Business Income Deduction. It is a new provision from the most recent changes in the tax law (Tax Cuts and Jobs Act) that allows small business owners to deduct up to 20% of their qualified business expenses.

You can join in this conversation on February 27, at 7 pm eastern, when NAIWE will host a discussion on identifying and managing difficult freelance clients. The cost for NAIWE members is only $10! Non-members can join for $30. Register today!