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Freelancers, as self-employed individuals, have specific tax filing requirements that differ from traditional employees. Here’s a comprehensive guide to the tax forms freelancers need to file:
Income Tax Returns
Form 1040 (U.S. Individual Income Tax Return)
As a freelancer, you must file Form 1040 (or 1040-SR for seniors) to report your income. If you’re liable for income tax, you need to use Form 1040 or 1040-SR, along with Schedule C, which is due by the 15th day of the 4th month after the end of your tax year (typically April 15 for calendar-year taxpayers). IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C)
Schedule C (Profit or Loss From Business)
You must file a separate Schedule C for each business you operate. IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) This form reports your business income and expenses to determine your net profit or loss from your freelance activities.
Self-Employment Tax Forms
Schedule SE (Self-Employment Tax)
If you’re liable for self-employment tax, you must file Schedule SE with your Form 1040 or 1040-SR. IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) This form calculates the self-employment tax you owe, which covers your Social Security and Medicare taxes.
Line 27 of Form 1040 states: “One-half of self-employment tax. Attach Schedule SE”. Dawson U.S. Tax Court Opinions: Amy Yu-Wen Chien The instructions for this line state: “If you were self-employed and owe self-employment tax, fill in Schedule SE to figure the amount of your deduction.” Similarly, Line 58 of Form 1040 states: “Self-employment tax. Attach Schedule SE”. If you’re self-employed, you need to complete Schedule SE and attach it to your tax return. Dawson U.S. Tax Court Opinions: Amy Yu-Wen Chien
Estimated Tax Payments
Form 1040-ES (Estimated Tax for Individuals)
For estimated tax payments, you’ll use Form 1040-ES, which is due on the 15th day of the 4th, 6th, and 9th months of your tax year, and the 15th day of the 1st month after the end of your tax year. IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) For calendar-year taxpayers, these dates are April 15, June 15, September 15, and January 15 of the following year.
As a freelancer, you should make quarterly estimated tax payments to help pay your taxes throughout the year, including self-employment tax. IRS – Publication 5369: Gig economy and your taxes: things to know This helps you avoid a large tax bill and potential penalties when you file your annual return.
Information Returns You May Receive
Form 1099-NEC (Nonemployee Compensation)
Form 1099-NEC is used for reporting nonemployee compensation and must be filed with the IRS by January 31 (even if filing electronically). IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) As a freelancer, you’ll receive this form from clients who paid you $600 or more during the tax year.
Form 1099-MISC (Miscellaneous Information)
Some gig companies will track some of your income information and send you a 1099-MISC at the end of the year. IRS – Publication 5369: Gig economy and your taxes: things to know This form is used for various types of payments other than nonemployee compensation.
Form 1099-K (Payment Card and Third Party Network Transactions)
For 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements. IRS Newsroom – IR-2024-06 – IRS reminder: Jan. 31 filing deadline for employers to file wage statements, independent contractor forms If you receive payments through platforms like PayPal, Venmo, or other payment processors, you may receive this form.
Special Circumstances
Form SS-8 (Determination of Worker Status)
If you believe you’ve been misclassified as an independent contractor when you should be treated as an employee, you can file Form SS-8 to request a determination from the IRS regarding your worker status. This might be appropriate if you’ve received a determination letter from the IRS stating you’re an employee of the firm, or if you believe you should have been treated as an employee. IRS IRM 21.6.4 Tax Computation / Accounting Period Changes
Form 8919 (Uncollected Social Security and Medicare Tax on Wages)
Employees who were misclassified by their employers as independent contractors use Form 8919 to figure and report their share of uncollected Social Security and Medicare taxes due on their compensation. IRS IRM 21.6.4 Tax Computation / Accounting Period Changes If you performed services, other than as an independent contractor, and your employer didn’t withhold Social Security and Medicare taxes from your pay, you must file Form 8919 with your Form 1040 or 1040-SR. IRS – Publication 525: Taxable and Nontaxable Income
Record-Keeping Requirements
The IRS requires you to keep adequate proof of income and expenses. Even if companies track some of this information for you and send you tax forms at the end of the year, it’s important that you keep track of all your income and expenses to report on your tax return. IRS – Publication 5369: Gig economy and your taxes: things to know
Good record-keeping includes:
- Tracking all business income, even if not reported on a 1099
- Documenting business expenses with receipts
- Maintaining mileage logs if you use your vehicle for business
- Keeping records of home office expenses if applicable
- Saving documentation of business-related travel, meals, and entertainment
Filing Deadlines
The key tax filing deadlines for freelancers include:
- Annual Tax Return (Form 1040 with Schedule C and Schedule SE): Due April 15 (or the next business day if it falls on a weekend or holiday)
- Estimated Tax Payments (Form 1040-ES):
- 1st Quarter: April 15
- 2nd Quarter: June 15
- 3rd Quarter: September 15
- 4th Quarter: January 15 of the following year
- Extension Request (Form 4868): If you need more time to file your tax return, you can request an extension until October 15. However, this is only an extension to file, not an extension to pay any taxes owed.
Electronic Filing Requirements
Many freelancers can file their tax returns electronically, which is often faster and more secure than paper filing. The IRS provides various e-filing options, including free filing options for those who qualify.
Potential Penalties for Incorrect Filing
If you incorrectly classify an employee as an independent contractor, you may be held liable for employment taxes for that worker plus a penalty. IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) Similarly, if you fail to file required forms or pay estimated taxes on time, you may face penalties and interest.
Conclusion
As a freelancer, your tax situation is more complex than that of a traditional employee. You’re responsible for reporting all your income, paying self-employment taxes, and making quarterly estimated tax payments. Keeping detailed records of your business income and expenses is crucial for accurate tax filing and maximizing your deductions.
Consider consulting with a tax professional who specializes in self-employment taxes, especially when you’re first starting out as a freelancer. They can help you set up a proper record-keeping system, identify all potential deductions, and ensure you’re meeting all your tax obligations.
Sources:
- IRS Publication 334: Tax Guide for Small Business
- IRS Publication 5369: Gig economy and your taxes: things to know
- IRS Newsroom – IR-2024-06
- IRS Publication 525: Taxable and Nontaxable Income
- IRS Internal Revenue Manual 21.6.4