Did you know that becoming a freelancer means filing your own taxes?
When you’re at a company, taxes are easy. Your employer gives you a W2 once a year, which you then use to fill out your tax forms and (hopefully) get a return.
The employer takes care of all the business taxes for you. Most likely, you don’t even consider it.
But if you’re a freelancer, it’s another story entirely. You’re responsible for filing your own taxes, and it works a bit differently than it would if you were employed by a company.
Many wonder how to file taxes as a freelancer. Fortunately, we have the answer.
Keep reading to find out how to nail your taxes!
Who Needs to File Taxes?
Freelancers often have a life that many only dream about. As a freelancer, you don’t have to answer to bosses, go to annoying team meetings, or smile your way through a conversation with a difficult coworker.
Instead, you schedule your own work and do everything exactly whenever you want.
Still, the U.S. government considers you a professional business, and that means you have to pay taxes. In fact, only people who make under $400 a year are exempt from filing freelance taxes.
What You Should Know About Freelancer Taxes
When you work for a company, your employer pays for about half of your total taxes, and you pay the other half.
Yet, when you’re a freelancer, you must pay both the self-employment and the income tax. This ends up being about 15.3% of your earnings.
Most freelancers have to file their taxes on a quarterly basis. If you don’t, you could face large fines come the traditional, annual tax season.
To find out whether or not you need to file quarterly taxes, the IRS asks you to refer to the 1040-ES form on its website.
How to File Taxes as a Freelancer
So, unless you’re not freelancing full-time and are making less than $400, you need to know how to file taxes as a freelancer.
Unfortunately, this isn’t as straightforward as it is for filing taxes when you work with a company. It involves reporting how much you earned from each source of your income, which can be difficult since freelancers receive income from many sources.
Below, we’ve included some tips for filing taxes as a freelancer.
Get Your Forms
Clients who pay freelancers more than $400 for projects might send them a 1099-MISC form for their taxes. Those who pay through PayPal might send a 1099-K form.
You can use these forms to keep track of and report your income to the IRS.
If you don’t get these forms, though, you still need to file your taxes. The IRS has a Schedule C form to report your income.
Hire an Accountant
If you don’t already work with an accountant, you should.
Why? Accountants become huge lifesavers during tax season. They’re able to guide you through calculating your taxes. This is essential because if you get your own calculations wrong, it can cause some major headaches.
While it is legal for you to do your taxes yourself, accountants are more familiar with the tax system, making hiring one a fantastic investment.
Learn More About Freelancing!
Now that you know how to file taxes as a freelancer, you’re on your way to running a successful freelancing business!
Taxes are an important portion of a business’s expenses. Freelancers need to make sure they understand the tax basics, keep track of their forms, and hire a professional accountant to help them.
Want to learn more about becoming a freelancer? Apply to our school for freelancers today!
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