Freelancers do, however, have to pay taxes like everyone else. Firms also do not have to pay Social Security and Medicare taxes on freelancers as they do on full time employees, nor are health, vacation or retirement benefits paid. Freelancers earn more because they pay for these expenses themselves. When it comes to self-employment taxes, however, there are a few important things a freelancer needs to remember. Hold off on billing clients until the next year .
Many small businesses can use the cash method of accounting for tax purposes.
This privilege becomes a real treat at year's end, because you have some flexibility to time income and deductions with the goal of reducing, or at least deferring, taxes. If you expect next year's marginal rate to be the same or lower than this year's, consider pushing taxable income from this year into next or accelerating into this year deductions that would otherwise be claimed the following year. On the income side, cash basis taxpayers are required to include only payments received by year's end. For checks, the key date is when they hit your mailbox, not when they are cashed or deposited. Thus, the surest way to defer income is to wait until next year to send out bills.