A Taxation Guide for New Freelancers in the USA

Last Updated on: January 6th, 2020


April means “tax time” to many people.

Many freelancers and other business owners use various bookkeeping software or accounting services to record business and personal expenses, such as Freshbooks, Zipbooks, or any of these alternatives.

My guest today is Samantha Staufenberg and she is going to discuss taxation issues for new freelancers living in the USA.

I’m also going to include an infographic for you, taken from The Freelancer Tax Guide For 2016

Take it away, Samantha!

New to Freelancing? Think of Taxes!

Tired of a 9-5 job? Just venturing into the exciting world of freelance or self-employed work?

Don’t forge ahead just yet.

Before you delve too far into taking freelance work, you should protect yourself by looking into the self-employed taxation laws in your country.

This article will equip new American freelancers with the knowledge necessary to navigate the US tax system.

Intuit QuickBooks has a Self-Employed Center that has a plethora of freelance tax filing and tax deduction information to explore. The information on this article will be pulled from Intuit’s Complete Guide to Taxes for the Self-Employed.

Taxation… from the Start

At the beginning of every year or at the start of a new relationship, every company or website will need to have you fill out a W-9.

Track how much you will be paid. While some companies or websites will send you a 1099-K or a 1099 MISC form (freelance versions of a W-2) to report your taxes, they might not be required to, depending on how much you earn. Even if you don’t receive a 1099, they will still be reporting your earnings to the IRS.

Filing Your Taxes

Don’t assume you can wait until the traditional tax season to file your taxes. If a self-employed individual is expected to pay $1000 or more in taxes, they will need to pay four times a year (April 15th, June 15th, September 15th, and January 15th).

Evaluate if you can wait until April to pay your taxes by taking your monthly freelance average and multiplying it. Plug the numbers into this free Self-Employed Tax Calculator. Just put in your prospective income and click calculate. If the number is anywhere near $1,000 in taxes, you might want to file quarterly just to be safe.

How to Pay Taxes in the USA

How do you pay taxes? You will file a Form 1040-ES form from June to January with the estimated expected income for the year reported. Each quarter you will re-estimate how much your yearly income might be. In April you will fill out Form 1040 where you will report your actual yearly income.

What if you overestimate your freelance earnings? You will receive the extra taxes back in your tax return.

What if you underestimate your freelance earnings and end up owing far more than $1000 by the end of the year? You will probably pay a 6-8% penalty and interest for whatever portion of taxes you did not pay quarterly.

Needing to pay a fine for not estimating your exact earnings seems like a low blow. Thankfully, after the first year, the US government cuts you some slack if you expect your business to grow but don’t know by how much. The safe harbor rule allows you to only pay 100% or 110% (if you make more than $150,000) of what you paid last year. At the end of the year, you will pay the difference without a penalty or interest.

What if you can’t afford to pay your taxes?

You can file an extension with the IRS. You will be required to work out a payment plan.

And that is everything you need to know about paying taxes as a freelancer.

Taxation might seem intimidating (and it is, a tad), but as long as you’re organized, meticulous, and prepared, you will navigate the paying freelance taxes for the first time with ease.


Now here’s the infographic Lorraine promised you!
Freelancer Tax Guide
Source: Micah Fraim, CPA

Samantha Stauf, taxation specialistConnect with Samantha Stauf on Twitter (@SamStauf).

9 thoughts on “A Taxation Guide for New Freelancers in the USA

  1. minion rush says

    I think this is an informative post and it is very useful and knowledgeable. I really enjoyed reading this post. big fan, thank you!

  2. Hello everyone; this was great advice to freelancers. I imagine they worry more about finding jobs and earning the income than on estimating income and paying taxes.

    My income from sales of amusement equipment is so sporadic that I’ve yet to use the quarterly payments. I am sure they have been charging me a penalty but luckily I haven’t ended up owing any money out of pocket.

    Of course, it helps that I get an additional credit for being blind — that is almost the same as having a dependent. Thanks for sharing. good luck, max

    • says

      Hi, Max. Thanks for figuring out how to comment on my re-vamped site! 😉

      Freelancers are essentially business owners, like you, and tax time is never fun for anyone, especially if you don’t have money put aside for such things as paying the government!

      I’m grateful to you for sharing this post. Thank you so much!

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