How do freelancers and self-employed workers pay taxes?
The government doesn’t make a distinction between freelancers and self-employed when it comes to paying taxes.
Generally, the Internal Revenue Service (IRS) classifies self-employed workers if:
- You carry on a trade or business as a sole proprietor or an independent contractor.
- You are a member of a partnership that carries on a trade or business.
- You are otherwise in business for yourself (including a part-time business)
It’s not very precise, but you can see that it buckets together self-employed, freelancers and independent contractors.
Depending on the nature of your business and its goals (i.e., hiring staff or getting business loans), you may want to register your business with the IRS for tax purposes. This is not always necessary for freelance workers, but it can be helpful to separate your business from your personal assets.
Contact a lawyer, an accountant or the local Small Business Administration (SBA) to know what’s best for your business needs.
Filing taxes as a freelancer or a self-employed worker is your responsibility. The IRS checklist is a good place to start, but you’ll also need to research your local and state requirements.
Most business owners pay taxes on a quarterly basis, estimating the amount they will owe throughout the year. You can use the IRS form 1040-ES to estimate tax payments.
If you’ve registered your business, you’ll need to address business taxes on the federal, state and local levels. This includes income tax, self-employment tax (a social security and Medicare tax), and employment taxes if you have employees.
Plenty of income tax calculator tools are available to help you plan what you’ll owe for the year. The amount you pay depends on your age, gender and marital status – all things on your freelance income tax form when you file.
As for freelance tax deductions, there are plenty of those. This includes obvious things like your office space, office supplies and travel expenses. But don’t forget to include things like advertising and marketing services, health insurance premiums and professional development courses.
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Freelance vs. self-employed. Either way, you’re busy juggling work to keep your business going.
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