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If you’re a freelance worker, tax season is already here, and you have a few weeks to file taxes. A few things to know before filing taxes may help you.

You may qualify for tax deductions for your work, which can help you decrease your taxable income. There are also things to know, such as the forms you need and how to avoid potential penalties. Here are five things you need to know before filing your freelance taxes.

Make Sure You Have All of the Necessary Documents

The first thing you need to know before filing taxes is knowing which documents you need. You’ll need a few forms before filing taxes as a freelancer, including:

  • Form 1040 (Individual Tax Return)
  • Form 1040 Schedule C (Profit or Loss from Business)
  • Form 1040 Schedule SE (Self-Employment Tax)
  • Form 1099-MISC
  • Form 1099-NEC

    • The first forms you’ll need are Form 1040, Schedule C, and Schedule SE. 

    You’ll use Form 1040 to file your individual tax return and calculate your self-employment tax. After figuring out your self-employment tax, you’ll enter this amount on Form 1040 (Schedule C).

    You’ll receive a Form 1099 if you earned $600 or more during the year. You may receive two tax forms as a freelancer: Form 1099-MISC and Form 1099-NEC. 

    You’ll receive Form 1099-MISC to report miscellaneous income, such as other income payments, not found on other 1099 tax forms. You’ll also receive Form 1099-NEC to report your income as a freelancer.

    While having all of your documents for freelance taxes will make filing taxes easier, tracking your income may also be helpful. 

    There are different ways you can track your income as a freelancer. There are some tips that can help you, not only when tax season arrives but after filing taxes:

  • Keep receipts for expenses. This is a requirement for expenses over $75. Separate your business expenses from your personal expenses. 
  • Track your expenses and income in a business journal or a spreadsheet.
  • Track your business mileage, business travel, and office expenses, if applicable.

    • Tax Deductions Are a Great Way to Lower Taxable Income 

    The second thing you need to know before filing taxes is about tax deductions. There are tax deductions available for freelance workers. These tax deductions can help you decrease your taxable income.

    Some of the best tax deductions you may qualify for as a freelancer are:

  • Business travel 
  • Health insurance
  • Home office 
  • Internet expenses 
  • Office supplies
  • Vehicle expenses

    • You'll Use Schedule SE Tax Form to Calculate Self-Employment Tax

    The third thing you need to know before filing taxes is about Schedule SE. This is the form you’ll use to pay self-employment taxes. 

    There are two parts to Schedule SE, but you’ll calculate self-employment tax in the first section. You’ll calculate your self-employment taxes on the following lines of the form:

  • Line 2: You’ll list your net loss or net profit from Schedule C or Schedule K-1. 
  • Line 4: You’ll multiply your number from line 2 by 92.35% if your income is more than zero. 
  • Line 6: This number is the same as line 4 if you don’t have church employee income or income from optional methods.
  • Line 7: Lists the limit of income subject to the Social Security tax. For 2021, this number is $142,800.
  • Lines 8a: You’ll list different social security wages and tips in line 8a, if applicable. If this is higher than the $142,800 in line 7, you’ll skip lines 8b to 10 and proceed to line 11. 
  • Lines 8b to 8d: You’ll list unreported tips in line 8b, and wages subject to security tax in Line 8c. You’ll combine these totals in line 8d.
  • Line 9: You’ll refer to the number in line 6. If the number in line 6 is higher than $142,800, then $142,800 will be self-employment tax.
  • Line 10: You’ll multiply the smaller number from line 6 or line 9. Then, you’ll multiply the smaller number by 12.4% to figure out Social Security taxes.
  • Line 11: You’ll multiply line 6 by 2.9% to determine Medicare taxes.
  • Line 12: Add the totals from line 10 and line 11 to calculate your self-employment tax.

    • You Should Have Been Paying Quarterly Estimated Taxes

    Unlike employed folks, freelancers need to pay quarterly estimated taxes. Estimated taxes are a requirement if you expect to owe $1,000 or more when you file your return. You may also pay estimated taxes in the current year if your taxes were more than zero the year before.

    Quarterly estimated taxes are due based on different quarters during the year: 

  • Quarter 1 is from January 1 to March 31. Taxes are due April 15. 
  • Quarter 2 is from April 1 to May 31. Taxes are due June 15.
  • Quarter 3 is from June 1 to August 31. Taxes are due September 15.
  • Quarter 4 is from September 1 to December 31. Taxes are due January 15 of the next year.

    • You’ll figure out the amount of estimated taxes owed by completing Form 1040-ES. The IRS has a few guidelines for freelancers seeking to pay quarterly estimated taxes: 

  • If you estimated your earnings too high, you’ll complete another Form 1040-ES. Using this form, you’ll recalculate your estimated taxes for the next quarter.
  • If you estimated your earnings too low for the current quarter, you’ll complete another Form 1040-ES. Using this form, you’ll recalculate your estimated tax for the next quarter.
  • If you haven’t been paying quarterly estimated taxes, or you didn’t pay enough in estimated tax payments, there may be penalties. You may also face penalties by paying estimated tax payments late, even if you’re receiving a refund.

    • Consider Working with a Tax Professional

    As a freelancer, it’s crucial to manage your documents, track your finances, and make payments on time. There are useful things you can implement now before filing taxes, so you can get a head start when it’s time to file taxes. 

    This tax season, save time and stress by working with 1-800Accountant to file your freelancer taxes. 

    This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.