Talking to TaxAct About Making Taxes Better for Freelancers

Photo by Marius Masalar on Unsplash.

This past January, I was listening to a 99% Invisible podcast episode when I heard Roman Mars talk about the ways in which TaxAct made the tax process easier for freelancers — a topic of extreme interest to me, having spent the past six years working with various CPAs to get my taxes done — and how you could save money by signing up through a special 99PI link.

As regular Billfolders already know, that’s exactly what I did.

After I raved about TaxAct on The Billfold (and noted that, like me, they were based in Cedar Rapids) you all suggested I set up an interview — so I sent a few emails, hopped on my bike, and rode out to the TaxAct offices to meet with gig economy product manager Jenna Ivanoski and ask her how TaxAct developed its freelancer-friendly tax software.

“We’ve always offered the type of tax filing that a freelancer needs,” Ivanoski explained. If you wanted to fill out a Schedule C, for example, TaxAct gave you that option. However, freelancers (like me) were sometimes hesitant to use DIY tax software, in part because they were unclear on how to report business expenses and deductions. I reminded Ivanoski that freelancers who go searching for information on how to do their own taxes often end up reading cautionary tales like this 2014 article from Forbes:

Shana Bickel, a Sarasota, Florida-based certified public accountant who focuses on small business owners, tells the story of a client who came to her while being audited after having used TurboTax to file. While redoing his tax return, she saw he had taken a deduction for educational expenses up to $250, which teachers take if they buy supplies for their classroom. But he was a personal trainer. When she asked him what that deduction was, “he said, ‘Yeah, I buy a lot of materials that I educate my clients with. I said, ‘Did you realize you just took the K-12 teachers’ expense?’ And he’s like, ‘No, I just answered the question how TurboTax presented it,’” she says. While it was true that he paid for educational materials out of pocket, “only a CPA would understand what that is — that if you’re not a teacher, this line should be blank,” says Bickel.

(That article alone kept me from using DIY tax software for at least three years.)

This year, TaxAct launched a new tax filing solution for freelancers, designed to take freelancers step-by-step through the filing process. That’s what Roman Mars was promoting at the end of his podcast, and that’s what I used to do my taxes this year. It was by far the easiest tax process I’d experienced since becoming a freelancer; I loved TaxAct’s intuitive interface and easy-to-understand forms. I also loved the Deduction Maximizer.

“We looked at the top ten freelance professions,” Ivanoski explained, “and identified the top deductions.” The Deduction Maximizer is designed to help you organize your business expenses into tax-deductible categories and make sure you don’t forget any common-but-easily-overlooked deductions, such as mileage or office supplies. The Deduction Maximizer also explains what each deduction category means, so you don’t accidentally claim a deduction that isn’t yours.

I’d been doing freelance taxes long enough that I was well aware of my potential deductions. For me, the Deduction Maximizer was a game-changer because it gave me a template through which I could track next year’s tax deductions. Previously, I’d spend all year collecting receipts and then, at tax time, spend another hour or two sorting them into broad categories, like “travel” and “website-related.” I’d turn all of that information into a document that I’d hand off to a CPA, who would then re-organize the expenses into more IRS-friendly categories.

With the Deduction Maximizer, I was able to view all of the potential categories myself — and I immediately started sorting 2018’s business receipts into those categories. That’ll make it so much easier when I do my taxes next year.

TaxAct is also working to expand the services it offers freelancers. “We’re adding partnerships with other companies,” Ivanoski said, “so we can integrate tools like expense tracking.” (I am very excited about anything that streamlines the expense tracking process.)

I asked Ivanoski about THE DREADED AUDIT, since the biggest thing freelancers worry about after “what do I do with this huge pile of receipts” is “what if I did it wrong.” Ivanoski reassured me that most audits were actually pretty simple: “If you have your documentation and tracking, it shouldn’t be too difficult to address [whatever questions the IRS has].” TaxAct offers the option to sign up for Audit Defense, a service that, should we get audited, will help us navigate the audit process, and I am signed up and ready.

I’m also ready for next year’s taxes, or as ready as I can be considering that we’re only three months into 2018.

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