Freelance Switch

Posted: 20 Jan 2011 05:30 AM PST

Credit: photo by kozumel/flickr

There’s a point in every business when having a CPA becomes necessary. Your taxes get too complicated for the local tax preparer, you need to start thinking about saving for retirement and you generally need to make sure that you’re bringing in enough money to grow, at least a little. For freelancers, however, identifying that point can be tough.

A part-time freelancer with a day job almost never needs a CPA. Even someone who has been freelancing full-time for a while may not need a CPA. And if you don’t need a CPA yet, that’s fine — why pay for an accountant’s services when all you really need is some help from a tax preparer?

What Can a CPA Do For You?

Natalia Sylvester is a freelance writer. She’s been going to the same CPA for years — she started out bringing her taxes to her parents’ CPA when she landed her first job and stuck with that CPA when she need more help. “In the beginning especially, he helped me get organized in terms of my record keeping, what expenses I could deduct, how much of my income I should be saving for tax purposes, etc–basically educating me on how the whole process for freelancers differs from when I was employed. Aside from my yearly tax return, he also calculates my quarterly payments, so I send him all my records periodically. He’ll also say things like, ‘Wow, you’re really picking up steam,’ when I’ve had a really great quarter, so that’s always nice.

You may not need a certified public accountant for all your accounting needs, of course. There are a variety of other professionals whose skill sets overlap with CPAs to a certain extent. Mariette Knoblauch is a tax accountant and provides services such as startup consulting — setting up your books, getting a business license and so on — as well as tax preparation services. Knoblauch also helps small business and freelancers find ways to improve profitability, find more deductions and generally keep more money in their pockets. She points out, “Consulting with an experienced bookkeeper, accountant or CPA who does a lot of work with freelancers can save time and money. Getting your books set up properly gives a freelancer critically important information about costs and profitability in real time, so changes can be made if necessary to stop doing unprofitable things (or raise prices so they become profitable). Consulting with a tax professional (registered preparer, enrolled agent, or CPA) allows a freelancer to plan and arrange their business so that they can take advantage of all the deductions and credits available to them, and pay the lowest amount of tax they legitimately can.”

What You Need to Look For

There are accountants who specialize in working with freelancers, although that’s not necessarily a necessity — even for a freelancer who is looking for an accountant. Rather, it’s important that your CPA (or any other financial professional) is generally comfortable with the mechanics of small business, like Sylvester’s. She says, “He had worked with other freelancers, though it wasn’t necessarily something he specialized in. To me it was more important that I could trust him, and by the time I started freelancing I’d already been doing my taxes with him for several years, so we’d built a working relationship. It was also helpful that a lot of his clients were small business owners, some of whom had started out as freelancers and then formed LLCs or Inc’s, so I knew that we’d be able to continue working together as my business grew.”

While you may not need a full-fledged accountant right away, talking to a bookkeeper early on can help you get your books set up in such a way that your future accountant won’t feel the need to charge you extra just to clear up the mess. You’ll want to start looking at transitioning to an accountant as your freelance business grows and you need to start looking for more deductions and ways to help your business grows. It’s also helpful to have an acocuntant on your side if you run into problems — preferably before the problem even starts. Knoblauch notes, “A freelancer would need a CPA for any audit or review work, for example if reviewed financial statements are needed for a bank loan. A CPA, enrolled agent, or lawyer is needed in case of an IRS audit — those are the only people allowed to represent you before the IRS.”

Pricing can vary from accountant to accountant, ranging from $150 per hour to $400 per hour. Before that number scares you, think about how your own pricing works: you can charge more per hour as a freelancer because it typically takes you less time to complete a project in your particular field. It may take a CPA only two hours to complete a tax return that someone with less expertise would spend an entire day on. Sylvester points out that she feels that what she pays is definitely worth it. “I’d pay more if I had to. It’s not just a matter of my time being valuable (which it is), but the peace of mind from knowing that I’m handling my taxes correctly, and the amount of money I save by doing so, is worth it to me.”

Credit: photo by kozumel

5 Tips for Freelance Mentor Relationships

Posted: 19 Jan 2011 05:30 AM PST

credit: antonella.beccaria on flickr

January is National Mentoring Month in the United States. Wherever you are in the world, I suspect that many of us have a mentor (or five) to thank for our freelance successes. I personally have a handful of generous, wonderful people who helped connect me with potential clients, find my voice as a writer, and navigate contract negotiations when I was first starting out.

I still turn to several of these mentors for advice periodically, but I've also found myself on the other side of the table, mentoring up-and-coming writers as they build up their confidence and client base.

Here are some of the tips I've learned about being a good mentee.

First do your homework, then ask questions.

Many long-time freelancers get repeatedly asked basic questions from those who are starting to freelance (or considering freelancing). There are tons of online resources and books that already answer the big, open-ended questions like, "how do I find clients?" or "what's a query letter?" Instead of asking these kinds of questions, which could take the recipient hours to answer, do some preliminary research first. Then you can ask more specific questions like, "I noticed you write for several food websites – any tips on breaking into those markets?" or "I love the way you set up your portfolio, and I wondered what program you used?" (Yup, a little flattery doesn't hurt either.) Also, don't be surprised if someone refuses to divulge trade secrets or doesn't have time to talk shop for hours. Not everyone has the time or desire to be a mentor, but plenty of people do have a mentoring mentality.

Avoid treating your mentor like a therapist.

Freelancing can get lonely at times. When you get rejected by your dream client or your wireless goes on the fritz or your invoice "gets lost" for what feels like the zillionth time, it's tempting to want to vent. Hopefully you have a supportive family and friends or a good therapist. Because sending long tirades to your mentor about things he or she can't fix may not create the most polished impression. If you need advice on what you could have done differently to land that dream client next time or ensure that collections runs more smoothly, ask away. Just try to keep it professional.

Show your appreciation.

Mentors are busy people, especially when they have their own business to run and clients to keep happy. So, it's important to be gracious and always thank them for their time. When your mentor really goes above and beyond, it's appropriate to take your gratitude up a notch, too. One writer who emails me regularly actually sent me a custom magnet from CafePress as a thank you! Another emailed me a photo of a birthday cupcake to show how excited she was about a new client I'd helped her land. Get creative!

Don't blindly follow advice.

Just because someone tells you that cold-calling or email blasting is the best way to get clients doesn't mean it's the most effective strategy for you. Maybe you'll have better luck networking in person with local business owners or using social media. But if you decide to disregard your mentor's advice, then don't complain later that you can't find new clients/didn't land the project you wanted/couldn't meet your deadline. I've had colleagues ask me to connect them with editors or other people in my network, then been surprised (and a little disappointed) to discover that they never followed through after I gave them an introduction. It's hard to be sympathetic to someone who laments their lack of clients but doesn't follow through when you're practically handing them an opportunity.

Cultivate multiple mentor relationships.

Mentors get busy. Sometimes they leave the industry to start a family or pursue other interests. Sometimes you outgrow them. That's why it's a bad idea to rely on one person for all your freelance advice (not to mention the fact that you could exhaust them with questions if you aren't careful). Some freelancers or small biz owners create a formal or informal "board of advisors" instead of seeking advice from a single mentor. That way you can consult a mix of people with different expertise and target your questions accordingly. For instance, you could have an attorney friend who knows the ins and outs of copyright law, a fellow creative you can bounce ideas off of, and a few others to fill in the gaps.

Photo credit: antonella.beccaria/flickr