From writing, instructing classes, photography and programming, to working from home or performing at an event, freelancers have the liberty of being their own boss. Although this type of employment comes with freedom, it doesn’t eliminate the reality of being responsible for filing your taxes.
As a freelancer, you must file your income taxes. As a business owner, you still have to pay self-employment taxes too. Thankfully, the comprehensive TaxBandits software will guide you through the entire filing process so you can quickly and easily complete your return without any hassle or confusion.
Know Your Income
As a freelancer, all of your income must be reported It is important to keep track of how you get paid, when you get paid, and the amount that you were paid. Although it can be a tedious task, keeping track of your various payment methods (cash, checks, online invoices, and more) should be detailed and organized in the event of an audit.
Employees of a traditional company receive a W-2 statement with their reported income, but freelancers normally receive numerous 1099-MISC Forms from their employers, which report payments for services performed for a business by people not treated as its employees. TaxBandits allows for you to handle both W-2 and Form 1099-MISC needs online.
Be clear about which return you should file
Freelancers that established their business as an LLC should report their income and make necessary tax payments on the annual individual return Form 1040, with Schedule C or E (if the business is real estate related).
However, if your freelance business is structured as a multiple-member LLC, a partnership, or a corporation, you will need to file a separate return for your business such as a Form 1065, Form-1120, or Form 1120-S.
Calculate the Amount of Taxes Owed
Those that are considered freelancers should withhold taxes from their compensation since they are not withheld as if they were an employee for a business.
When getting paid for your services, remember that you don’t get 100% of that profit. Freelancers should budget the amount of taxable income owed. In addition to income taxes, you will also owe the self-employment tax which is basically the Social Security and Medicare taxes which are taken out of traditional employee’s paychecks.
Make Necessary Deductions When Filing
Freelancers have tons of deductions that they can apply when filing their annual tax return. For example, if you have a home office, such as a portion of your home used exclusively for your work, you can deduct it.
Other deductions include the cost of travel and lodging, as well as up to a 50% deduction for entertainment and meals. In order to make these type of deductions, you must provide proof that the expenses were necessary for your business. An easy way to accomplish this is to maintain all of your receipts, dates, and reasons why they were business-related expenses.
E-file with TaxBandits if You Employ Freelancers
Eliminate the stress of reporting wages paid to your freelancers by filing with TaxBandits. We provide a simplified, easy-to-use process to handle any 1099-MISC needs that you may have.
All you have to do is create your free TaxBandits account, select “Create New 1099-MISC Form,” enter the payer details (Name, END, and Address) and the recipient details (Name, SSN/EIN, Address), and enter the federal detail for miscellaneous income.
Once this has been completed, you will then enter your state information and taxes withheld from each applicable state, choose if you would like the form to be mailed to your recipient, review the form, pay for it, and transmit it directly to the IRS.
We’re Here To Help
Taxes can be confusing, but the US-based, dedicated TaxBandits support team is here to make sure that they’re not. Please don’t hesitate to contact us with any questions that you may have. We’re available over the phone Monday – Friday from 9 AM to 6 PM EST at 704.684.4751. We also offer live chat and you can take advantage of our 24.7 email support at support@TaxBandits.com.