A Brief Tax Primer for Freelancers: Part 1
Being a freelancer offers a lot of freedom.
You decide when you work, where you work, and what you work on. However, there’s one constant that doesn’t go away–you still have to pay your taxes every year. Paying taxes are a little bit more complicated as a freelancer. What does it mean to pay taxes as a freelancer?
As a freelancer, you’re considered to be self-employed by the IRS, which means that you need to pay both an income tax and a self-employment tax (SE tax). The self-employment tax is a Social Security and Medicare tax for self-employed individuals.
Generally speaking, you only have to pay income and SE taxes if you had net earnings (the business expenses subtracted from your business income) of more than $400.
Since the tax isn’t deducted from your paychecks, you need to submit estimated tax payments on a quarterly basis, usually on the 15th of April, June, September, and January, by making use of Form 1040-ES. You can easily submit payment online through the Electronic Federal Tax Payment System. If it’s your first year of self-employment, you’ll need to estimate your income for the year.
Don’t worry if your estimates wind up being off—if your estimates are too high or too low, you can submit another 1040-ES to recalculate your taxes for the next quarter. In addition to federal taxes, you’ll need to file state and local taxes, where applicable.
Preparing your taxes can be complicated, even more so as a freelancer, so it may be a good idea to use a tax preparer. Regardless of whether you use a tax preparer, it’s important for you stay on top of your record keeping throughout the year and be accurate when you file your taxes.
“But I’m a freelancer!” probably won’t have much sway with the IRS. In our next post in this series, we’ll survey the different forms you’ll need to file taxes as a self-employed individual.
LegalShield provides access to legal services offered by a network of provider law firms to LegalShield Members through member-based participation. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation or advice. See a plan contract at legalshield.com for specific state of residence for complete terms, coverage, amounts, and conditions. This is not intended to be legal or medical advice. Please contact a medical professional for medical advice or assistance and an attorney for legal advice or assistance.
LegalShield is a trademark of Pre-Paid Legal Services, Inc. (“LegalShield”). LegalShield provides this blog as a public service and for general information only. The information made available in this blog is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide a recommendation as to a specific matter. The blog post is not a substitute for competent legal counsel from a licensed professional lawyer in the state or province where your legal issues exist, and you should seek legal counsel for your specific legal matter. All information by authors is accepted in good faith. However, LegalShield makes no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of such information. The materials contained herein are not regularly updated and may not reflect the most current legal information. No person should either act or refrain from acting on the basis of anything contained on this website. Nothing on this blog is meant to, or does, create an attorney-client relationship with any reader or user. An attorney-client relationship may be formed only after the execution of an engagement letter with an attorney and after that attorney has confirmed that no conflicts of interest exist. Nothing on this website, or information contained or transmitted by this website, is intended to be an advertisement or solicitation. Information contained in the blog may be provided by authors who could be a third-party paid contributor. LegalShield provides access to legal services offered by a network of provider law firms to LegalShield members through membership-based participation. LegalShield is not a law firm, and its officers, employees or sales associates do not directly or indirectly provide legal services, representation, or advice.