Tax planning is the process of developing strategies to minimize your tax liability. It is the process of anticipating your future tax liability and developing a plan to reduce it. Tax planning can be as simple as choosing the right tax deductions or as complex as setting up a trust fund to reduce your estate taxes.

Tax planning is especially important for freelancers and side-hustlers because they have unique tax situations. Freelancers and side-hustlers are typically self-employed, which means they are responsible for paying their own taxes. They also often have irregular income, which can make it difficult to estimate their tax liability.

According to the IRS, 36.2% of the U.S. workforce is self-employed. The average self-employed worker earns $68,500 per year. Self-employed individuals are more likely to be audited by the IRS than traditional employees. The average tax refund for self-employed individuals is $2,800.

There are a number of things that freelancers and side-hustlers can do to plan for taxes, including:

• Tracking their income and expenses. This is essential for accurate tax reporting. Freelancers and side-hustlers should use a bookkeeping system or software to track their income and expenses throughout the year.
• Estimating their quarterly taxes. Self-employed individuals are required to make estimated tax payments quarterly if they expect to owe at least $1,000 in taxes for the year. Freelancers and side-hustlers can use the IRS Form 1040-ES to estimate their quarterly taxes.
• Taking advantage of all the tax deductions they're eligible for. There are many tax deductions available to freelancers and side-hustlers, such as the home office deduction, business travel expenses, and equipment costs. Freelancers and side-hustlers should be sure to keep all receipts and documentation to support their deductions.
• Choosing the right business structure. The business structure that a freelancer or side-hustler chooses can have a big impact on their taxes. For example, sole proprietors are taxed on their business income as personal income, while S corporations and limited liability companies (LLCs) are taxed as separate entities.
• Getting professional help. If a freelancer or side-hustler is not sure how to file their taxes or how to take advantage of all the tax deductions they're eligible for, they should consider hiring a tax professional.

Tax planning is an important part of running a freelance business or side hustle. By following the tips above, freelancers and side-hustlers can save money on taxes and focus on growing their businesses.