If you are a professional creative, you are likely a contractor or at least do some contract work in the eyes of the IRS. This means when tax season arrives, things are a little more complicated than being a traditional employee.
Traditional employees, or people who work full-time or part-time for a company, receive a W-2. Meaning, taxes are automatically pulled from their paychecks. If taxes aren’t removed from your paycheck, you probably receive a 1099 form (more on this later) to file your taxes. This means the IRS considers you an “independent contractor”. Even though you may call yourself a freelancer, gig worker, consultant, business owner or self-employed.
If you receive a 1099 for some or all of your work – this guide will help you feel confident as you file your taxes as a freelancer.
Forms You Need to File Taxes as a Freelancer
W-9: If you are a freelancer, the first tax form you should receive from any new client is a W-9. This is the official form your clients use to document your name, address and tax payer information. It is how you get paid and how the IRS tracks your taxable income.
1099-MISC: Also known as the Miscellaneous Income Tax form, this is the form that reports your taxable income. If you are a freelancer or gig worker with multiple clients, you will receive a 1099-MISC form from each of your clients. And if you have a full-time or part-time employee in addition to your contract work, you will receive both a W-2 and a 1099-MISC respectively.
1099-K: If you use P2P payment apps like Venmo, Paypal or Zelle and received over $600 in payments for business over the course of the year, you will receive this form. The 1099-K is a statement of reportable payment transactions. Be careful, if you have clients that paid you via payment app, you may not receive a 1099-MISC from them. But that doesn’t mean you don’t have to report that income. The 1099-K document will help you do so.
What can you deduct from your taxes as freelancers?
As a freelancer, you are considered a ‘self-employed’ person in the U.S. The IRS sees you as a business regardless of whether you have an LLC, DBA or other business entity. This means there are additional tax deductions you are entitled to that traditional employees are not.
Some common taxes as freelancers include, home office, utilities, travel expenses, equipment. But there are many other self-employed deductions you can take advantage of depending on your industry, products or services.
How to file your 2021 taxes as a freelancer?
Like mentioned above, filing your taxes as a freelancer is considered “more complex” than the average tax filing. Meaning to get the most out of your deductions, you will likely need more than the free tax software available by the IRS. So remember, if you’re feeling overwhelmed, it’s always a good idea to consult with a tax professional before filing.
Feel like your filing will be straightforward? The IRS provides free filing software if you make less than $72,000 per year. If your contract work exceeds this amount, you will need to fill out your forms manually. This means you must report and file each form accurately, calculate your own deductions and determine how much you owe.
Again, this is why consulting a tax professional is always recommended when filing taxes as a freelancer.
FAQs for filing taxes as a freelancer this year
When are federal and states taxes due?
Typically taxes are due on April 15, unless there is a legal holiday on that date. This year, that is the case, meaning taxes are due Monday, April 18, 2022.
What is the tax rate for freelancers?
Your tax rate is based on your total yearly income. The self-employment tax rate for 2021 is 15.3% up to the first $142,800 of your net income.
Do freelancers pay less in taxes?
While freelancers have more business expenses and deductions they can claim as self-employed persons. They still pay 15.3% in medicare and social security taxes, plus income and / or state taxes.
What are quarterly taxes?
Paying estimated quarterly taxes is highly recommended (but not required in most circumstances) for freelancers who are trying to avoid a large payment on tax day. If you choose to do so, you will make payments each quarter based on the income you have made rather than owing it all on April 18. If you didn’t do this in 2021, you can start fresh in 2022. But that means you need pre-pay your 2022 first quarter taxes on April 15 and your 2021 yearly taxes on April 18.
Quarterly taxes for 2022 are due, April 15, June 15, September 15 and January 15.
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