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,1 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.