Tax Professionals' Guide to Assisting Freelance Clients
Post COVID, and with increased focus on technology, the freelance economy continues to grow, tax professionals and practice owners face unique challenges in managing a blended workforce of employees and independent contractors and more clients than ever are seeking to file taxes with self-employment income. The shift presents multiple opportunities for tax professionals to help their freelance clients navigate the complexities of self-employment and tax planning as well as grow their own practices in new ways.
The rise of the freelance economy has been driven by skilled professionals seeking greater autonomy, flexibility, and diverse work experiences. With an increased focus on remote work and improved technology, flexibility is available to a wider array of professionals than ever before. As a result, companies are increasingly relying on freelancers to fill critical skill gaps and bring fresh perspectives to their projects. Tax practice owners may find themselves managing a blended workforce, balancing the needs of both employees and freelancers, especially as hiring challenges in the accounting industry continue to rise.
To effectively serve freelance clients, tax professionals must understand the unique tax implications of self-employment. Freelancers are responsible for paying self-employment taxes, estimating and remitting quarterly tax payments, and tracking business expenses. If freelance work is new to your clients, they will need guidance right down to what expenses should be tracked. Tax professionals can help their clients by:
- Educating them on the tax obligations of self-employment, including the need to pay both the employee and employer portions of Social Security and Medicare taxes. Self-employment taxes can catch clients off guard when they aren’t planning for a big bill.
- Assisting in setting up a system to track income and expenses, ensuring proper documentation for tax deductions. Use a freebie excel tracker to give to clients or prospective clients as a lead generation tool.
- Guiding clients through the process of estimating and remitting quarterly tax payments to avoid penalties and interest. Most clients won’t know how to even calculate these amounts or when they are due.
- Advising on the tax benefits of retirement savings plans for the self-employed, such as SEP IRAs or Solo 401(k)s.
- Helping clients understand the tax implications of their business structure (sole proprietorship, LLC, or S-corp) and recommending the most advantageous option for their situation. Create a comparison chart that you can easily utilize across client meetings.
In addition to tax planning, tax professionals can assist freelance clients in their transition to self-employment by:
- Recommending business insurance policies to protect against potential liabilities.
- Advising on the importance of creating legally binding contracts with clients to ensure clear expectations and timely payment.
- Suggesting tools and resources for managing projects, invoicing, and bookkeeping.
- Connecting clients with other professionals, such as attorneys and financial advisors, to create a comprehensive support network.
Some of my most lucrative lead generation sources haven’t even been current clients, but someone that I took the time to connect to the right professional when they needed the help. Keeping your network strong will help add significant value to your client relationships.
As the freelance economy continues to evolve, tax professionals and practice owners must adapt to the challenges and opportunities presented by a blended workforce. By providing specialized guidance and support to freelance clients, tax professionals can play a crucial role in helping these individuals thrive in their self-employed careers while ensuring compliance with tax regulations. Additionally, it helps practice owners to stay in the loop of what is cutting edge technology and how to best work with freelancers within our own practices.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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