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:
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:
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:
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:
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:
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:
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.