Taxes for terps

I just paid my first year of taxes from 100% interpreting income. I wanted to put together a brief post explaining the tools I used, and how I used them, to achieve what for me has been a relatively stress-free tax year.

First let me explain in general terms how it works if you’re self-employed. There are two levels: federal and state (I will be representing the great State of Washington of course). Federal self-employement taxes will require you to pay quarterly amounts (April, June, September, December I believe) since nothing is taken out of your paycheck. In Washington, there is a state excise tax that I believe I am required to file twice a year (seems like it might depend on the business size). I have not had to pay any excise tax since I receive a “small business credit,” but I am still required to report income.

My method for keeping track of income, mileage, deductions, invoices, and quarterly taxes is straightforward: Quickbooks Self-Employed. I don’t believe there was anything I needed to keep track of that this app does not track. I bought the combined package with TurboTax so it incorporated everything at the end of the year and I’m not sure if it could have been much easier. I’ve even heard rumors of interpreters who keep track of mileage in a notebook! I couldn’t imagine the cumulative time I’d be spending on inputting all that information at the end of the year. 

Because I didn’t have anyone very clearly explain how I needed to go about taxes when I started interpreting, the biggest mistake I made was confusing the state excise tax with the federal quarterly payments and therefore not setting aside enough money. My recommendation is, from your very first paycheck, to immediately transfer 20% to a separate account where those funds will not be touched (this has also been recommended and discuss by other interpreters, for example Judy and Dagmar Jenner on their blog.).

In summary, I used Quickbooks and TurboTax and everything went smoothly. The main thing for me was to begin immediately setting aside funds for my quarterly taxes. I don’t know if I’ll have to hire an accountant for future tax years. Since I’m a community Interpreter and work almost exclusively through agencies, keeping track of invoices isn’t too much of a hassle.

Let me know if you have any questions or insight to add. I’ll continue to share on tax information that could be helpful as time goes on; obviously I’m still quite the newb myself. Thanks for stopping by.