Freelance Taxes – Some Information & Tips
Many people do freelance work. In fact, it seems that everyone I know is picking up some type of freelance work on the side. Freelancing is a wonderful way to earn some extra cash. You choose your hours, where you work, what projects you do and you get to be your own boss. It doesn’t matter whether you freelance full time or you supplement your primary income with freelancing of some type…you have to pay taxes!
Self-Employment Tax – Freelance Taxes
So $400 of freelance income is the magic number. If you earn more than that in freelance work during the year, you need to pay self-employment tax. The tax comes out to about 15% and it covers Medicare taxes and social security. You still need to pay your regular income tax rate on your freelance income as well. For this reason, it is a good idea to set aside a minimum of 30% of your freelance income toward your tax bill.
These are the deadlines for quarterly payments:
- First Quarter…Deadline: April 15
- Second Quarter…Deadline: June 16
- Third Quarter…Deadline: September 15
- Fourth Quarter…Deadline: January 15
We would love to help you manage your self-employment income and properly estimate your tax payments!
Tracking & Reporting Your Income
If a client pays you over $600, they should send you a 1099-MISC form. You are in no way absolved of reporting your income or paying taxes if you do not receive the proper forms from your clients. You will file this income on a Schedule C. This is also where you will report your expenses.
Deductions Often Claimed By Freelancers
The IRS allows you to deduct expenses that are ‘ordinary and necessary’ for operating your business and/or doing your work. It is very important to keep your personal and business related expenses separate. Make sure to track these expenses during the year. Here are some examples of deductions you can take as a freelancer:
- Computers and related tech
- Subscriptions to software
- Office supplies
- Utilities
- Website or advertising costs
Make sure to save all of your original receipts and invoices. Staying organized throughout the year is a big help when it comes to tax time. Opening a different bank account for your freelance work is an easy way to keep things separate and more clear (not only for taxes, but for budgeting)!
Let Us Help!
Don’t make the mistake of handling all of your taxes yourself. We are here to help you with every aspect of your taxes. We will answer all of your questions and take care of everything specific to your tax situation. There are many changes coming to our tax laws and we are up to date on all of them. Give us a call or stop in today!
