Freelancing can be incredibly rewarding, but it’s not without its challenges. One of the biggest hurdles all self-employed workers face, regardless of their industry, is filing their taxes correctly. Independent contractors have different filing arrangements and financial obligations than traditional employees. If you’re a freelancer—or you’re thinking about taking the leap and becoming one soon—here are some factors to keep in mind regarding tax preparation. 

3 Ways Taxes Can Be Different for Freelancers

1. You Can Deduct a Lot of Expenses 

Freelancers can deduct all kinds of expenses—as long as they save all records, receipts, and invoices. Common examples include the price of marketing, professional development, software, and travel. It’s also possible to write-off costs associated with managing a home office. 

2. You Must Make Estimated Payments

Because the payments that freelancers receive from clients are not taxed, they must make estimated quarterly payments to the IRS throughout the year. This ensures they do not face a huge tax bill when it comes time to file. These payments are due April 15, June 15, and September 15 of that same year and then on January 15 of the following one. 

3. You Must Pay Self-Employment Tax

In addition to paying income tax, freelancers are responsible for self-employment tax. This tax rate is 15.3% and covers their financial obligation for paying into the Social Security and Medicare programs. Traditional employees must pay into these programs, too, but they pay about half as much (6.2%) because their employer pays the other half. 

The best way to ensure your annual tax return is both accurate and thorough is by turning to a professional. If you earn some or all of your income from freelancing, turn to Lee & Smith, PLLC for tax preparation help. Serving the Texarkana, TX, area, they have been providing comprehensive accounting services for individuals and businesses for nearly 30 years. To learn how a CPA on their team can assist, reach out on their website or call (903) 832-4339.

For full disclosure and information on freelance tax preparation, contact them.