{"id":359507,"date":"2022-03-03T07:00:00","date_gmt":"2022-03-03T14:00:00","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=359507"},"modified":"2022-04-18T11:24:16","modified_gmt":"2022-04-18T17:24:16","slug":"how-to-do-taxes-as-a-freelancer","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/finance\/how-to-do-taxes-as-a-freelancer\/","title":{"rendered":"How to file self-employed taxes"},"content":{"rendered":"\n
\"How<\/figure>\n\n\n\n

Disclosure regarding our editorial content standards.<\/a><\/p>\n\n\n\n

This guide will take you through how to file self-employment taxes step-by-step, with some essential tips and tricks you can keep in mind for future years. <\/p>\n\n\n\n

Understand the basics of self-employed taxes<\/h2>\n\n\n\n

You’ve probably heard that all income is taxable. That’s essentially true, but there’s a minimum amount you have to earn to qualify for paying taxes. Individuals have to file a tax return if they earn self-employment income of at least $400. <\/p>\n\n\n\n

To calculate your self-employment income, you’ll need to gather all your invoices from the tax year and add up the totals. Freelancers are encouraged to keep a running spreadsheet of their invoices throughout the year to make sure they don’t miss anything or make mistakes. The total amount for the year is your total annual income. <\/p>\n\n\n\n

If you charge a client $600 or more in a year, they’ll owe you a 1099-NEC Form. (Note that before 2020, the 1099-NEC Form was called the 1099-MISC Form.) This Form will summarize the total services you charged them for a tax year. You should check these 1099-NEC Forms against your records and make sure they match up. <\/p>\n\n\n\n

Clients who pay via electronic service providers such as PayPal may choose to send you a 1099-K Form instead of a 1099-NEC. Both of these Forms are similar and should be used to help calculate your total income earned. <\/p>\n\n\n\n

However, don’t count on receiving every 1099-NEC or 1099-K Form you’re due. It’s quite common for clients to forget to send these out, so you must have your own records to rely on. Not receiving these Forms is no reason not to include that income on your tax return. <\/p>\n\n\n\n

Lastly, an essential part of filing your taxes is understanding your tax classification. You\u2019re self-employed<\/a> if you’re an independent contractor or in business for yourself. However, if you’re a business owner who hires or contracts individuals to provide services to your business, your tax classification is a business owner. <\/p>\n\n\n\n

The tax breakdown<\/h3>\n\n\n\n

Self-employed individuals must file an annual tax return and\u2014sometimes\u2014pay estimated quarterly taxes instead of paying taxes just once a year. <\/p>\n\n\n\n

Taxes for self-employed individuals are broken down into two main categories: self-employment tax (SE tax) and income tax. When a person works for an employer, Social Security and Medicare taxes are withheld from their wages by their employer. However, when a person is self-employed, the SE tax is their way of contributing to Medicare and Social Security taxes. <\/p>\n\n\n\n

\"The<\/figure>\n\n\n\n

The self-employment tax for 2021 is 15.3 percent of net earnings. This number is a combination of 2.9 percent paid for Medicare and 12.4 percent for Social Security tax. In 2021, everything up to $142,800 is subject to the 15.3 percent total SE tax. Anyone earning above $142,800 only has to pay the 2.9 percent Medicare tax. However, single filers earning above $200,000 (or joint filers earning above $250,000) may have to pay an additional 0.9 percent Medicare tax. <\/p>\n\n\n\n

In addition to SE tax, there are also standard income taxes due for the self-employed. <\/p>\n\n\n\n

The tax Forms you\u2019ll need to use<\/h3>\n\n\n\n

Individuals who work for an employer typically get a W-2 Form for their taxes showing everything they earned. However, this isn’t the case for the self-employed. Instead, the main tax Form you’ll use to file your self-employed taxes is Form 1040, which you fill out yourself. <\/p>\n\n\n\n

The Form 1040-ES, Estimated Tax for Individuals<\/a> helps self-employed people determine how much they owe every quarter (paying quarterly is a recommended way of approaching taxes instead of paying once, yearly). This Form also has vouchers you can use to process the amount owing to the IRS. <\/p>\n\n\n\n

You’ll also want to file a Schedule C Form<\/a> to report your business profits and a Schedule SE to calculate your self-employment taxes. Your clients may send you 1099-NEC Forms<\/a> or 1099-K Forms<\/a>, which you’ll want to compare to your own records. <\/p>\n\n\n\n

The deadlines\u2014paying taxes quarterly<\/h3>\n\n\n\n

Individuals working for an employer only have to pay their taxes annually because the employer withholds income and other taxes from their paychecks. However, self-employed individuals receive all their gross income up front and must make more frequent payments to the IRS. The IRS wants its money throughout the year, so self-employed individuals usually make estimated quarterly payments. <\/p>\n\n\n\n

You only have to pay quarterly taxes if you estimate you owe more than $1,000 in taxes per quarter. The deadlines for quarterly taxes are:<\/p>\n\n\n\n

If the deadline falls on a weekend or a holiday, taxes are due on the next business day.<\/p>\n\n\n\n

Individuals can always choose to pay their taxes early and not wait for the deadline to file. <\/p>\n\n\n\n

Avoiding the quarterly deadlines and only paying your taxes annually can potentially result in you being charged with an estimated tax penalty. <\/p>\n\n\n\n

How to file<\/h2>\n\n\n\n

You have a few options when it comes to filing your taxes. You can opt to do them yourself (usually using a program like TurboTax or TaxAct), or you can hire a tax professional to file on your behalf. If your taxes are complicated, hiring a professional is usually a worthwhile investment. But if you think your taxes may be relatively straightforward, filing yourself can save you some money. <\/p>\n\n\n\n

\"How<\/figure>\n\n\n\n

4 steps to file<\/h3>\n\n\n\n

The four steps to filing self-employed taxes are:<\/p>\n\n\n\n

  1. Determine your tax classification:<\/strong> First, you want to confirm that you should be filing as a self-employed individual. The IRS defines a self-employed individual as: