Unlike hourly or salary employees who work as part of a business's regular staff, freelancers must calculate and pay their own taxes periodically throughout the fiscal year. If you're new to freelancing, this can be an unexpected—and complex—area of business accounting to navigate on your own. Below, you will find some essential information about taxes and freelancing.

Minimum Income Amounts

Workers who earn at least $400 a year from freelance work must file a tax return. If you only freelance as an occasional side-job and earn less than this amount, you can retain it tax-free. But since self-employment tax is imposed starting at the $400 threshold, workers who earn over this amount need to file a tax return. Self-employment taxes are 15.3 percent on the first $132,900 of income for 2019; This covers Medicare and Social Security taxes.

Many freelancers, also known as sole proprietors, have expenses they can deduct from their earnings to ultimately lower what they owe in self-employment tax. Expenses typically include operating costs, such as office rent and supplies; advertising and marketing fees; and the costs of business-related travel. But the IRS needs to be aware of these expenses, which must be detailed on the Schedule C form.

When to Pay

Ideally, sole-proprietors should pay quarterly taxes throughout the fiscal year. In general, if you expect to owe at least $1000 in taxes, plan to submit tax payments once every three months. This requires a certain amount of accounting for planning, budgeting, and forecasting, so you will have to have an idea of what you will make for the year ahead and can budget accordingly. If you underpay on estimates, the remaining taxes will be due along with your yearly tax return. If you overpay on estimates, you will receive a refund.

Grayson Accounting, LLC, can help you make sense of the freelance tax-filing process and ensure you meet all estimated tax obligations. With more than 25 years' experience, they offer business accounting, bookkeeping, and payroll services to the St. Charles and St. Louis County areas of Missouri. They also provide QuickBooks and business consulting. Schedule an appointment with a trusted business accounting professional by calling (636) 233-7875 or visiting their website.