How to Do Your Taxes if You’re a Freelancer
Use These Forms
Fill It Out as a Freelancer: W-9
If you’re self-employed, clients or companies that hire you as a contractor might ask you to fill this out when you take the job. It asks for your name, address, Social Security Number and maybe your tax identification number if you are part of a company that’s been contracted.
Get This From Your Clients: 1099
If you’re self-employed, clients or companies that hire you as a contractor and/or freelancer might send this to you before the tax filing deadline. It’s a summary of money they’ve paid you, which is the amount that you need to pay taxes on. You will only receive this form if the client paid you more than $600. If you were paid less, you won’t get a form, but you must still report that income (see below).
Fill Out Your Taxes On: 1040
Because you are reporting self-employment income, you will be using the original 1040 form, instead of the 1040A or 1040-EZ form. Learn more about the different types of 1040s.
For Filing Simple Freelance Taxes: Schedule C-EZ
If you’re a freelance graphic designer or writer, you have a pretty simple business and can use a simplified form instead of the Schedule C, below.
Use this form if:
Your business expenses are less than $5,000
You have no employees
You have no inventory (sorry Etsy sellers, you need the more complicated form, Schedule C)
You are not using depreciation or deducting the cost of your home
File Business Taxes: Schedule C
Schedule C addresses taxes specific to your business.
Estimate Your Taxes: Schedule SE
This is the form you’ll use to estimate your taxes for the year; file this with the IRS.
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If You Had Capital Gains and Losses: Schedule D and Form 8949
These forms are used to report capital gains and losses. This is when you sold investments for more or less than what you paid for it. Because the rules governing these forms are very detailed and specific, make sure to read the IRS instructions if you think any of these circumstances might apply to you. Find instructions on the IRS website.
Use these forms if:
- You had a gain or loss from a partnership, S corporation, estate or trust
- You sold assets from your business
- You made a gain or loss on other assets, like futures contracts, etc.
Look for These Deductions
The self-employed can deduct business expenses that qualify, such as those mentioned at the beginning of this post. Overall, these expenses should be:
1. A generally accepted part of doing business in your industry. For example, a laptop if you are a writer, or business meals with clients if that is how clients are generally treated in your line of work.
2. Helpful and appropriate for your business. They don’t have to be indispensable, but should help you perform better in your business.
You can learn more about what makes an appropriate deduction for your business on the IRS website.
If you pay for your own health insurance, you can deduct the full cost on your 1040 as a personal expense. If you made a profit, you deduct it as an above-the-line deduction on line 29 of your 1040. If you did not make a profit on your business, it will be a below-the-line deduction, as a medical expense. Then you must itemize in order to claim it.
As a freelancer, you may do the majority of your work out of your home. That means you might be able to deduct the cost of your home office. (But watch out, this is a common audit trigger–see below.) You’ll use Form 8829 to calculate and claim this deduction. Just be aware you cannot claim an office deduction that is more than your net profit for the year. If your home office is worth more than your net profit, then you can carry the extra over to the next year.
These are different from business expenses, as they will be used over several years. Did you buy Photoshop, a computer or office furniture? These are all business assets. You’ll have to decide whether you would like to deduct the full cost in the year you bought them, or spread the cost out over the lifetime of the asset, which is called depreciation. A tax preparer can help you with all the hairy details, but here’s the short version of how to decide: Spread the cost out if you think you will be making more income in the future, or deduct them now if you had high income this year.