How to Spend Your Tax Refund

Now, let me start out by saying this: if your freelance writing business is making enough money, there’s a good chance you may not be getting too much back in your tax refund this year. In fact, freelance writing businesses that are really shakin’ are going to instead have to pay in taxes – not just right now, but once a quarter. We’ll get into that at a later date.

The reality is, though, that many freelance writers, especially those with children, find themselves in a bit of a “sweet spot” when it comes to taxes. They can expect a decent tax refund for one of two reasons:

1. They made enough money to fall into the “Earned Income Tax Credit” range, and/or

2. They have a spouse who makes regular payroll tax payments.

I’m Goin’ to Disneyland

One of the natural instincts people have when they come into a chunk of money is to treat themselves. You might decide to set your tax money aside for a family vacation during the summer, or a spring break cruise.

When I was growing up, I could always tell it was tax time because my dad would start a new home improvement project. Kitchen remodeling, a new carpet or a new vanity in the bathroom were all tangible outcomes of the tax refund.

You’re a Small Business Owner Now

As a freelance writer, you need to get into a different mode, now, however. You don’t get a weekly paycheck, which means you don’t pay taxes every week. You can’t guarantee your income, at least not as well as someone who’s under an employment contract somewhere else.

What all that means is you have to approach certain things differently. For you, a tax refund needs to be turned into an investment. You need to put it back into your business.

How to Spend Your Tax Refund

That can mean several things, but in my experience the places most in need of a cash infusion in a small freelance writing business are marketing and cash flow.

Marketing, of course, is how you promote your freelance writing business. It could encompass anything from business cards to hiring a blog designer to putting your business name into the yellow pages. How you spend your marketing dollar is up to you, of course, but just about any marketing efforts you make will have a monetary payoff.

Cash flow is another area freelance writing businesses need help with. You need to be able to pay yourself every month, no matter whether you’re in a feast or famine cycle. I am most comfortable with a savings that is equivalent to about six months of my business’ income (although my reserves are often far less than that). A sizable tax refund is a great way to help build that reserve.

So, what about you? Will you get a tax refund this year? If so, where will you spend it?