It’s a wonderful feeling to work as a freelancer where you do what you love, and you can set your own schedule and rates.  However, freelancers are not free from taxation, and it’s paramount that new freelancers understand how they should pay their taxes without giving too much of their earnings to the government.  If you earn up to $400 from freelance work in a year, then you’ll owe taxes on those earnings.  Self-employed individuals will need to pay both their income taxes and self-employed taxes.  The self-employed tax is 15.3% and this is to cover Social Security and Medicare taxes.  You would fill out the Schedule C form and then write this information on your 1040 form. You’ll also need to fill out a Schedule SE form to estimate your self-employment taxes.  Here are additional facts about freelancing and taxes.

How Often Do Freelancers Pay Taxes?

If you’re self-employed, you will file taxes quarterly.  The dates are April 15, June 15, September 15, and January 15.  When you file your quarterly taxes, you need to include the IRS SE form to show how much money you needed to pay for the year.  Since you pay taxes quarterly, it’s important that you save part of your income so that you’ll have the funds needed when tax time comes.  

What About Tax Deductions?

You can save money on taxes when you take advantage of self-employed tax deductions.  Your home office qualifies as a tax deduction.  You can deduct part of your rent or mortgage, prices of your utilities, repairs to the home, and general maintenance.  For those who obtained education in order to become self-employed and start a business, then you can deduct educational expenses on your taxes.  If you have a car, you’re allowed to deduct expenses associated with using your car for business purposes.

Important Tax Forms for Freelancers

Here are some essential tax forms that all freelancers should know about.  When you’re first hired by an employer, he will give you a W9 form.  This is what you fill out for tax purposes, and the purpose is to have your correct information so that they can put it on your 1099 form when it’s time to do your taxes.  The 1099-MISC form is what you receive if you earned $600 or more from the company.  If you’re a sole proprietor or solo LLC, then you would fill the Schedule C form.  This form is used to report your business income and expenses.   The Form 1040-ES is the form you’ll use to pay quarterly taxes.

I’m New to Taxes as a Freelancer.  Where Can I Get Assistance?

If you’re a freelancer with multiple clients and sources of income, it pays to be organized with your taxes.  You can meet with your tax preparer and have him walk you through the tax filing process.  If you can afford to do so, consult with a tax attorney who understands taxation for workers in non-traditional situations.

When you’re armed with the information you need, you can focus more on providing the best services to your clients instead of worrying about taxes.  If you need high-quality advice on navigating the freelance profession, contact us.  We can answer all of your questions, so you can thrive long-term.