When most of us set out to write freelance, we don’t anticipate the work required to actually run the business side of things. Jumping into freelance work comes with a veritable mountain of practical considerations — Where will I work? How will I find clients? How will I be able to pay my utility bills? — that command immediate attention. Building a client base takes work and persistence, but at the end of the day, you’re running a business and that means you’ll eventually have to pay your debt to society.
As the saying goes, the only things you can’t escape are death and taxes. This year, in addition to striking out into the world of freelance writing, I learned a few things about appeasing Uncle Sam. A disclaimer first: I am not an accountant or a tax preparer. Everyone’s situation is different, so consult with a professional before acting on my advice. But from one newbie freelancer to another, here are a few things I’ve discovered:
- Yes, you have to pay taxes as a freelancer. I know, it isn’t fun, but remember that taxes pay for all sorts of good things, like national parks and schools. When you do contract work, your taxes aren’t automatically deducted like they are with a regular payroll, so you have to figure out your tax liability at the end of each year. Being a freelancer means you’re self-employed in the eyes of the federal government, so you’ll pay a different rate (usually higher) than you would if you were someone else’s employee.
- You’re gonna need a 1099-MISC. Most jobs issue you a W2 that breaks down your income for the IRS. For contract and freelance work, you need to get a 1099-MISC from each client who paid you $600 or more. You should get those by January 31.
- You might be able to claim deductions. Emphasis on might. Since your freelance work is a business, you can sometimes claim businesses expenses on your tax return. Traveling for work that you don’t get reimbursed for, buying printer ink and having a dedicated home office can make you eligible for a small tax break. To take advantage of these deductions, you’d better have your receipts handy, as well as a form called a Schedule C. If you choose to go this route, it’s a good idea to shell out a little to get professional help. I don’t even pretend to understand it.
- You’re in the big leagues — don’t freak out. Paying taxes comes with the territory. It can be frustrating and takes significantly longer than just filing W2s (even more so if, like me, you have a combination of W2s and 1099s). If you keep accurate records, file your receipts, keep copies of your invoices and follow all of the steps, you’ll be able to tackle your freelance taxes like a pro. With practice, you’ll learn to navigate the rough waters of tax season and get back to what you truly love — writing — before you know it.
Don’t just take my word for it. Educate yourself on freelance tax considerations help from the Freelancers Union, {ink}thinker, TurboTax, this helpful How-To, or your local CPA. If you have any tax tips for freelancers, leave them in the comments. Good luck!
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Jonny Eberle is a writer in Tacoma, WA. He is a staff writer for Grey Cell covering foreign policy and conflict areas on a freelance basis. You can follow him on Twitter.