Lesson 3: What to know about taxes as a freelancer
The tax code is daunting enough for a full-time employee — but juggling multiple jobs can make submitting taxes even more challenging.
The Internal Revenue Service states that you must file a tax return if you have net earnings from self-employment of $400 or more from gig work, even if it’s a side job, part-time or temporary. Freelancers report earnings using 1099 forms from their clients, and they are responsible for withholding and submitting their taxes. This is different from the more well-known W-2 form used by employees, whose employer withholds taxes from their earnings.
Freelancers should seek expert advice and potentially consult a Certified Public Accountant (CPA) to understand the tax code and avoid being penalized. Freelancers can also talk to their client’s HR department for additional information about submitting taxes.
This lesson will help prepare you for freelancing and handling the taxes involved. To learn more, check out the Work for Yourself@50+ Freelancing Resource Center, which provides helpful lessons and resources for both first-time freelancers and experienced independent workers.
Conduct outside research on current tax laws for freelancers. As a gig worker, it’s essential that you know your rights and which laws apply to your compensation.
Review, in full, any contract and document that an HR department asks you to sign. There may be specific, critical information about how you’ll report earnings.
Have an open dialogue with your client’s HR department to ensure you’re following the proper protocol.
Seek counsel from a third party, such as a CPA, for guidance on tax regulations and laws. Independent contractors file different tax forms than part-time and full-time employees, which a CPA can help you navigate.
File your taxes by the deadline to ensure compliance and no penalties.