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6 Essential Tax Tips for Freelancers

The bill will soon come due to Uncle Sam. Have you paid your taxes yet? If not, it should be a priority. If the government is serious about anything, it is collecting money from you in a timely manner. Failure to do so can result in stiff penalties, including jail time.

Amanda DiSilvestro already noted that you still have to pay your taxes if you make money online. That much is obvious. But there is a reality of this situation: taxes are much more complicated for the self-employed, including freelancers. Here are some essential tips for getting through tax season with as little stress as possible.

1. File quarterly

When people switch from traditional employment to freelance work, they typically don’t understand how taxes work. Since their employer automatically deducts taxes, they typically think it’s just that easy. Let the employer handle it, file the proper forms, and collect a refund check. For freelancers, there is no such automation. Yet they still must play by the same rules as an employer.

Employers, believe it or not, file taxes quarterly. That is, they are actually paying your taxes quarterly. Employees don’t know this, of course, because they don’t see it. Freelancers have to act like companies, in that they are expected to file taxes quarterly. Failure to do so will result in interest penalties, which can add up. If you wait until April to pay your full tax bill, you’ll notice it’s quite a deal greater than you would have paid filing quarterly.

This lessons is most important for freelancers in their first year. They are often shocked when seeing that interest penalty (I know I was, and my dad is a CPA). Most tax software will automatically add quarterly stubs to your printout, and you can use those for next year. You can also check out the self-employed page on the IRS website to get all the forms you’ll need to file quarterly.

2. Keep independent records

When you are a traditional employee, a company will keep impeccable tabs on you. Those records are the most greatly scrutinized, and so companies will take pains to ensure they are accurate. With freelancers, they might not pay as great attention. That means you have to take it on yourself to keep records and ensure that each company you work for reports accurately.

Every time you get paid, you should make a record of it in a single document. When you receive your tax forms, you can check what the company reports against your own records. There’s a chance you’ll find discrepancies, which you must then bring to the company. The last thing you want is to pay too much in taxes, because a company you worked for kept poor records.

3. Software makes it easier

While you can keep your payment records in a simple Excel spreadsheet, you might find that it doesn’t help you much beyond cross-checking earnings. Simplicity has value, but taxes are anything but simple. Considering the penalties for under-paying and filing improperly, freelancers should have the foremost concern for the accuracy of their own records. One way to do this is to utilize accounting software.

Whenever I receive a payment from any company, I enter it into QuickBooks Mac accounting software. Since that software is geared directly towards accounting and bookkeeping, it keeps me perfectly organized. That way when I receive tax forms I can compare every little detail to what I actually earned. That ensures accurate tax records, meaning I’m not paying a penny more than I need.

The price tag for such software might seem steep at around $250. But there has been more than one year in which QuickBooks has saved me more than that on my taxes. Having accurate, well-organized information is your greatest asset. Invest in the software, and it will pay you back.

4. Get pushy about tax forms

One of the biggest hassles of tax season for freelancers is tracking down all the necessary forms. The problem is that freelancers are not in control here. The companies that contracted them have to send out the proper paperwork so that freelancers can file. But many companies are slow to produce these documents, despite laws that mandate they do.

Did you know that companies are obligated to deliver proper tax forms to you by January 31st? If you don’t receive forms by then, start to bug them> Call every day if you have to. It might be a big pain for them, but it’s a bigger pain for you to not have those tax forms. Not having the forms prevents you from filing, and filing earlier is better for everyone. Most importantly to the freelancer, it can mean the difference between getting your refund check in March vs. getting your refund check in June.

Remind companies you’ve worked for that they owe you those documents, and the law mandates they get them to you now. Don’t be intimidated. They are the ones in the wrong.

5. Report everything

Some companies, though, are not obligated to send you any forms. There are two instances where this might occur. First is a company operating outside the US. You will not receive paperwork from them, since they do not report to the IRS. But you still have to pay taxes on that income, since you earned it in the US. It means you have to self-report that income. It’s just another reason to keep accurate records.

The other instance is if you earned less than $600 from a particular company. At that point they do not have to send you documentation. Just as above, though, you still have to pay taxes on that income. Just as with international income, you must self-report anything earned. If a company pays you $500 they might not be obligated to send you forms, but you are absolutely required to pay taxes on that income.

Failure to report this income can result in penalties from the IRS. Just because it’s difficult for them to detect doesn’t mean you can get away without paying. If you ever get audited and they find you didn’t pay taxes on even $300 in income, they’re going to penalize you to the furthest extent possible.

6. Save more than you need

In the traditional employee model, we expect to overpay our taxes and receive a refund check once we file. That is not the case for freelancers. Tax structure simply works against those who are self-employed — an issue government should certainly fix given new economic realities. The biggest issue is with Social Security. Traditional employers pay half of their employees’ Social Security obligations. Freelancers have to foot the entire bill. It can really throw off any tax estimations.

It is imperative for freelancers to save a bit more than they think they’ll owe. That way when they file taxes they’re prepared if they actually owe additional money. Failure to do this can mean receiving penalties from the IRS for late or non-payment, or going into debt to get the funds to pay. Either way it’s not fun for the freelancers. The only solution is to save more, preparing yourself for every possibility.

No one enjoys tax season, least of all freelancers. The tax code is clearly geared towards traditional employees, even though freelancers are on the rise. Follow these tips, though, and you’ll have the easiest possible tax season.

Joe Pawlikowski is an independent contractor of six years’ experience. He writes for many different blogs and publications, and also does consulting work, so has many tax forms to file. You can visit his personal site at

Category: freelance writing

9 Comments on "6 Essential Tax Tips for Freelancers"


Welcome! I'm Bamidele Onibalusi, a young writer and blogger. I believe writers are unique and highly talented individuals that should be given the respect they deserve. This blog offers practical advice to help you become truly in charge of your writing career.

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