If you recently made the switch from employee to freelancer, it’s not just your daily routine that’s changed. Take the time to review federal tax law. Freelancers, or those whom the IRS calls independent contractors, have different obligations than traditional employees when it comes to their tax returns, as the guide below briefly explains. 

You Must Pay Taxes Quarterly 

As a freelancer, you are responsible for withholding your own income to cover your taxes. To prevent independent contractors from having to pay a massive tax bill at the end of the year, the IRS requires them to make estimated quarterly payments. For the 2019 tax year, these payments are due on April 15, June 17, and September 16 of this year and January 15 of next year. 

You’re Responsible for the Self-Employment Tax

Whereas employees only have to pay 6.2% toward Social Security because their employers pay the other 6.2%, freelancers are responsible for all 12.4% on their own. Freelancers must also cover the entire Medicare tax, which is 2.9%. Known as the self-employment tax, this amounts to 15.3% of their earnings. 

You May Deduct All Kinds of Expenses on Your Tax Returns

Considering the additional tax obligations for independent contractors, freelancing may not seem worth it. However, the various costs you may deduct can more than make up for the self-employment tax. Examples include relevant business expenses, a home office, and travel. Before deducting anything, though, talk to a tax preparer to confirm that it’s allowable so you don’t end up in trouble with the IRS. 

For help preparing your first tax return as a freelancer, turn to PMC Tax Services. Based in Lincoln, NE, this firm is proud to help clients around the country. Their knowledgeable tax advisors can assist with everything from state and federal tax filings to amended tax returns. Founded in 1989, they're proud to offer their services for affordable rates, and they’re personally invested in securing the best outcome possible for each and every client. To learn how they can help you this fiscal year, visit their website or call (402) 467-5529 to set up a meeting.