Freelancing can feel like you’re on top of the world, sipping coffee in your PJs while clients flock to you like moths to a flame. But then reality hits when it’s time to handle payroll. Managing your own payroll is no small feat, especially when your genius lies in design, writing, or coding— anything but accounting.
The fact is, even the most seasoned solopreneurs can trip up when it comes to payroll. So let’s break down the most common mistakes and, more importantly, how to dodge them.
Mistake #1: Mixing Business and Personal Finances
Ever paid for your groceries with your business card? Or maybe you’ve dipped into your business account for a weekend getaway? Mixing your business and personal finances might seem harmless until tax season arrives and you’re left sorting through a mountain of receipts.
How to Avoid It:
Open a separate bank account (and/or crypto wallet) for your freelance business. Keep your personal expenses and business transactions as separate as your work life and your social life. Not only does this make bookkeeping easier, but it also helps you avoid trouble with the IRS.
Need an extra hand keeping your finances tidy? This is where the Opolis and Bench partnership can be a game changer. With Bench’s bookkeeping services combined with Opolis, you can easily manage your business transactions and avoid those painful receipt-sorting marathons.
Mistake #2: Misclassifying Workers
Are you working with other independent workers? Or maybe you’ve hired a virtual assistant to keep your inbox under control. It’s crucial to classify them correctly. Misclassifying an employee as an independent contractor (or vice versa) can lead to penalties, back taxes, and even legal headaches.
How to Avoid It:
Understand the difference between an employee and an independent contractor. The IRS has specific guidelines, but here’s the gist: If you control what they do and how they do it, they’re likely an employee. If they control their own work and just deliver the finished product, they’re probably an independent contractor. When in doubt, consult with a payroll expert to make sure you’re classifying workers correctly.
At Opolis, we see the future of work as independent, so our tools are built specifically for freelancers, not companies. We empower you to run your own S-Corp, giving you full control over benefits and finances, even if you lose a client or gig. And with Bench keeping your records in check, you’ll avoid the stress of payroll mistakes and penalties.
If you’re expanding your team, consider engaging 1099 contractors through a B2B arrangement instead of hiring W2 employees. Paying contractors directly through their business streamlines your accounting and reporting while sidestepping employment risks. Plus, when you refer them to Opolis as Members, they get all the same perks!
Mistake #3: Forgetting to Pay Estimated Taxes
Ah, estimated taxes— the bane of every freelancer’s existence. Forgetting to pay them on time can result in penalties, and nobody likes throwing money away. It’s easy to overlook these payments, especially when you’re focused on delivering top-notch work to your clients.
How to Avoid It:
Set reminders for quarterly tax deadlines. Better yet, automate the process with Opolis and take your freelancing game to the next level by forming an S-Corp. Not only does this structure streamline your taxes, but it can also save you up to $5,000 a year. Imagine what you could do with that extra cash!
By setting up an S-Corp with Opolis, you can efficiently manage your estimated taxes, ensuring you’re never scrambling when deadlines hit. Tools from Opolis can also help you calculate your taxes, so you can stay on top of things without breaking a sweat.
With the Opolis and Bench partnership, you can seamlessly handle your estimated taxes and bookkeeping in one place, giving you more time to focus on growing your business instead of worrying about tax deadlines.
Mistake #4: Missing Payroll Deadlines
You might think that being a solopreneur means payroll deadlines don’t apply to you. Think again. Even if you’re only paying yourself, missing a payroll deadline can lead to penalties and disrupt your financial planning.
How to Avoid It:
Set up a consistent payroll schedule. Whether it’s bi-weekly, monthly, or any other schedule that suits your business, stick to it like glue. Automated payroll systems can take the guesswork out of the process, ensuring you never miss a deadline.
Opolis, for example, can help you set up automated payroll so you can focus on your work, not on whether you’ve paid yourself this month.
Mistake #5: Not Keeping Accurate Records
Independent workers often juggle multiple clients, projects, and deadlines. In the chaos, keeping accurate records can easily fall by the wayside. But sloppy record-keeping can lead to overpaid taxes, missed deductions, and a whole lot of unnecessary stress.
How to Avoid It:
Embrace technology. Use software to track your income and expenses, store receipts, and manage invoices. Even a simple spreadsheet can work wonders for keeping your financial records in order.
With the Opolis and Bench partnership, all your bookkeeping and financial records can be handled under one roof, giving you accurate, real-time insights into your business finances without the stress of managing it all yourself. Remember, the more organized you are, the less time you’ll spend untangling your finances later. And when tax season arrives, you’ll be glad you kept everything in check.
Mistake #6: Neglecting to Set Aside Money for Benefits
As a solopreneur, you’re not just responsible for your salary— you’re also responsible for your benefits. This means health insurance, retirement savings, and even paid time off. Neglecting to set aside money for these can leave you in a financial bind when you need it most.
How to Avoid It:
Plan for your benefits just like you plan for your taxes. Set aside a portion of your income for health insurance, retirement, and other benefits. As an independent worker, you have access to a wide range of options, including solo 401(k)s.
But why stop there? With Opolis, you can tap into the largest Cigna network plans available to freelancers, giving you top-notch health coverage. Plus, we offer other types of insurance, like dental, vision, and disability, so you’re covered from all angles. Let Opolis help you manage these crucial aspects of your freelance life, so you don’t have to go it alone.
How Opolis Can Help
Freelancing should be about freedom, not getting bogged down in payroll and tax issues. That’s where Opolis comes in.
Opolis is designed to take the stress out of managing your freelance business, so you can focus on what you do best. Whether you need help with automated payroll, worker classification, estimated taxes, or managing benefits, Opolis has you covered.
With Opolis, you get a suite of tools that simplify your financial life. From setting up a payroll schedule to keeping your records in check with Bench, Opolis is like having a personal payroll assistant in your corner. No more sleepless nights worrying about payroll mistakes. Instead, you can rest easy knowing that your finances are in good hands.
Ready to take the headache out of freelancing? Let Opolis handle the heavy lifting, so you can get back to doing what you love.
Reach out to Opolis at [email protected] to get started.