This article author’s personal opinions about taxes for freelancers. This article is not intended as a substitute for consultation with your licensed financial professional. Brandt Oliver is a CPA but he is not YOUR CPA. For questions about your specific tax situation, consult with your CPA.

Did you know the Internal Revenue Service (IRS) considers freelance writers small business owners? As freelance income is classified under self-employment income, you may be on the hook for taxes when Uncle Sam comes knocking.

Filing your taxes as a writer may seem complicated, especially when you don’t know where to start. But there are a couple of ways you can get through this minefield unscathed.

Enter the Self-Employed Tax (SET)!

The Self Employment Tax covers Medicare (12.4%) and Social Security (2.9%) taxes for freelancers. These are similar taxes to automatic deductibles on an employed individual’s payslip. These taxes account for 15.3% of your total earnings.

How Does The Self-Employed Tax Credit Work?

For instance, if you earn $3000 from freelance work in a given year, you’re responsible for paying taxes on these earnings. For a 15.3% deduction, you’ll pay $459 on a $3,000 earning.

It’s best to set aside taxes on all your earnings and pay them off quarterly, so you’re not blindsided by a massive tax bill at the end of the year. Quarterly seasons means filing returns from January through March, April through May, June through August, and September through December.

Even if you’re making less than $1000, and freelance as a side hustle, it’s still advisable to file returns and be transparent with the revenue service. In this case, you won’t need to make quarterly payments, but only report your annual earnings.

Why Is the Self-Employed Tax Beneficial for Freelance Writers?

Keeping detailed records of your income and deductions will help you stay organized throughout the year. But it’s not only your income account that is important, as a writer, you make payments for your Internet, research materials, computer hardware, self-employed health insurance, subscriptions, software, online publications, and even some food.

The Self Employment Tax carries deductions for all these expenses There are also home-office benefits you could qualify for. A look through the IRS website will let you know the benefits and deductions you are eligible for.  Deductions vary depending on the writer’s unique situation.

When you track your expenses, you’ll know how much you need and it will be easy to make a case for financial assistance.

How Can Writers Take Advantage of This Tax Credit?

Depending on where you live, you are to fill out a specific self-employment tax return form. The Internal Revenue Service website will guide you on the form of choice, and give you great tips on how to fill it out.

A Schedule C Tax Form breaks down all the information you need to fill out as a freelancer. You’ll also come across forms like the 1099-NEC and the 1099-K that cover non-employee compensation and online payment deductions respectively.

If you have doubts about your tax filing, consult a tax advisor and they will take you through the process. They will ensure your returns are updated, and help you take advantage of all benefits.

Important Things to Remember

Don’t assume your earnings are too little to incur taxes. The IRS considers earnings of $400 and above taxable. Paying self-employed tax will keep you good in the government books.

Most importantly, don’t spend your freelance earnings carelessly. Apart from paying taxes, think about keeping retirement savings, investing, and building an emergency fund.

No matter how little you earn, re-invest in a business or use the amount wisely to ensure you’re set for the future. By investing in tax credits, you’ll enjoy financial assistance when you need it, and keep a good stream of income.

RELATED

• Simple, Year-long Organization is the Key to Stress-free Tax Filing for Freelancers – by Mike Michelsen
• Tax Refunds of Tate Publishing’s Owners Will Be “Intercepted” by the Oklahoma Attorney General
• Tax Breaks for Freelance Writers! by Julian Block
• Tax Tips For Freelance Writers By William Pepe
• Your Guide to Operating a Computer-Based Business at Little or No Cost!

Brandt Oliver is a freelance writer and full-time Certified Public Accountant in Dallas. He frequently wires for local legal publications like The Daily Commercial Record, The Texas Lawbook, and many more.

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