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rednova
05-26-2012, 01:03 PM
Dear friends:
I have good news. After many years of doing animation for hobby,
I found a client who is willing to hire me to do some animation for
him. He is a musician, and wants me to do all the animation for
his upcoming music videos. He promises to pay me well,and not do
only one music video, but many.
I am really happy and excited about this.
Since this is gonna be my first time getting paid for my lightwave work,
I would like to know how to go about paying my taxes for it.
Please tell me how to do this !!! pay taxes.
And also, I have a serious debt I have to pay, so would it be possible
to use my first checks to pay debt, then later pay back the back taxes
I owe ?
Please help me !!!

DrStrik9
05-26-2012, 01:55 PM
It's financial management you're talking about here. It's a moving target, since in the US, there are several tax brackets. There are many ways of doing this, as in different management styles, but you are smart to think about this now instead of later.

My method is very conservative, but it works very well.

If you are working freelance, I highly recommend hiring good a CPA to advise you. The dollars you spend there now will be worth many times what you pay in skipped headaches later. If you are working as an employee, then virtually all your taxes will be taken out of each check, so in this case don't worry about taxes until the end of the year.

But if this work is freelance, basically it works like this: whatever you earn in gross, put the % portion that will be due in your tax bracket at the end of the year in a savings account, plus maybe an additional 5%, since with fluctuating workflow, you won't know exactly which bracket you will be in for the entire year. Take the excess from that account at the end of the year as a "bonus" to pay off debts, go on vacation, etc.

Personally, I don't recommend using the entire gross from the first earnings to pay existing debt, because all you're really doing is robbing future taxes you will definitely owe to pay the other. No matter how many music videos this one client says he wants to do, there is no guarantee even one will actually get finished. Both taxes and debt need to be paid, so do things in order, meaning set taxes aside on current earnings first, then pay other bills as you can.

Good luck.

rednova
05-26-2012, 02:46 PM
Dear Friend:

thank you for your advice.
You completely answered my question.
I really like the idea of saving the money and use excess.
I appreciate your advice !!!

ccclarke
05-26-2012, 03:07 PM
There's also the additional tax advantage of being able to write off a portion of your taxes for your domicile, equipment, utilities, and any other software you may need to do the job. Again, a good CPA can advise you on this. I'm able to write off subscriptions for trade magazines, organizational dues, training DVDs, etc.

When estimating your time for a client, double it, and make rock-solid sure you understand completely what the client wants before you start the job. I find the many changes are what drag a job out and you can lose a lot of money if you don't factor that in. Add any additional software to the job as well.

Check with a CPA sooner, rather than later so you know what receipts you need to account for. Your wallet will thank you.

CCC :)

DrStrik9
05-26-2012, 03:51 PM
When estimating your time for a client, double it, and make rock-solid sure you understand completely what the client wants before you start the job.

Yes, this is the TRUE purpose of pi. :D

Another suggestion: when bidding, include language that says you will charge additional for additions and changes outside the original scope of work as defined in your estimate. (When the changes come, estimate the new costs. Get client approval before doing additional work.)

ShadowMystic
05-27-2012, 03:46 PM
This is a VERY important subject among freelancers. I am thinking of writing out a formal contract including wording of change= higher cost/more time along with a change order document that has space to list changes a deate and a place for the client to sign. Unless someone else already has said documents and world like to share theirs as a sample/template?

JonW
05-27-2012, 04:17 PM
Some very good suggestions.


Also it's a good idea to aim for a minimum of 6 months cash buffer to fill in the gaps when you don't have work. Think of 6 months of savings as a zero bank balance. The closer you can get to this position the less stress you will have.

"It's easier to save a dollar than earn a dollar!"

Snosrap
05-27-2012, 11:25 PM
He needs to send you a 1099 if you/he are in the US.

biliousfrog
05-28-2012, 01:45 AM
The first thing I did when going self-employed was to see an accountant. He filled in all the forms for me, gave me advice on keeping my records and continues to save me money by claiming for things I'd never have thought of and giving me great advice. Ignorance is not an excuse, if you don't know all the laws and regulations regarding taxes in your country find someone that does or you could find yourself paying more tax than necessary or, at worst, find yourself in trouble for tax evasion.