Home / Insight / Commitmentphobe Freelancer – What to Do?!
Commitmentphobe Freelancer – What to Do?!
Question: I’ve been freelancing for awhile, and although I’ve stopped looking for a full-time/employee position, I’m not sure if freelancing is “forever” for me. What should I do – incorporate or keep being taxed as an individual?
Answer from Richard M. Prinzi, Jr., CPA & Co-Founder of F-Sharp Tax Services:
There is no real choice, as you will pay less tax as a corporation, always. This was always the best advice for freelancers, but under the Tax Reform Act of 2018, in my opinion, it’s now a required consideration for anyone privileged enough to make their living as a freelancer. Saving tax is not the only reason to incorporate, but it should be a major concern.
If it’s not cost effective for a particular individual, I generally advise against it, as there is a cost to prepare tax returns each year and you must pay a fee to the state where you incorporate. The annual state fee can range from $25 to $800, and formation cost ranges from $400 to $700.
It is best to have a tax professional do this for you. It seems simple and cheap if you look on the internet for low-cost options, but they almost always sell you things you do not need, fail to file the necessary tax documents and will cost you much more in the long run. Plus, they offer no quality advice on how to use the entity to your advantage. They are only offering to help with the legal retirements to form, NOT with the tax implications. If you are considering incorporating, selecting the right tax advisor is more important than saving a few bucks on the formation. Pay an extra $100 to get it right and begin a relationship with the professional that will deliver more savings than any other person you could ever hire.
This is a widget area, so please add widgets here...