Freelancers: What to Know Your First Time Filing Taxes

A freelance tax preparer working on laptop from home.

Yes! You did it, you are now your own boss or making money on the side but do you have any clue what to do when it comes time to filing taxes for your business?

Freelancers are supposed to pay taxes quarterly. You could be in for a rude awakening if you haven’t prepared properly.

Don’t be afraid, I’m here to help get you the information so you will never have to deal with the IRS.  I’m not a tax expert, but I have talked to a few to guide me through what I need to know and wanted to share what I’ve learned with you.

Gone are the days of your previous employer withholding your taxes before your paycheck, this will now be your responsibility.  You have to look at yourself as more than just a Freelancer, but a Business Owner and that includes every aspect of being in charge including accounting tasks.

I highly suggest getting a reputable Certified Public Accountant.  I previously used TurboTax, but since starting my own business, tax things have gotten a little more complicated. Costs for Accountant’s service ranges from $100-$1,000 depending on your earnings and deductibles.

I received $400 more in my tax refund with my CPA, experienced accountants know what questions to ask and can help educate you on how to make better business decisions.

I want to specify that these rules apply to U.S. Federal taxes, I can’t speak for other countries, and every state has different tax laws.  Some of this information comes from Below is the information you’ll need to prepare you for the tax deadline.

Pin or Bookmark this page because you’ll want to refer back to it often.

How Much Money Do You Have to Make before Filing Taxes?

If you make $400 or more during the tax year, you’ll have to file a tax return.

Filing taxes and paying taxes are two totally different things.  For example, if you earned $10,000 but had $9,700 in deductions, your net profit would only be $300.  You still have to file but most likely wouldn’t have to pay.

Estimate Your Quarterly Tax Payments

Wait! What? I didn’t know I have to pay taxes QUARTERLY…why didn’t anyone tell me?  This was my first thought when I heard this, and I’d knew I’d take a hit.  So just to be clear, let me tell you, as a freelancer (Sole Proprietor) we have to pay quarterly estimated taxes AND an annual return (if you earn more than $400).  I’ll get to the annual return next.

Making quarterly estimated tax payments is really to help us avoid paying a big tax bill come tax time or underpayment penalties. The income you receive does not withhold any taxes, and this is something we can’t avoid (Social Security and Medicare).

To calculate your estimated taxes use Form 1040-ES.

Trying to figure out your income for the year can be tough if you don’t have a steady income or you’re just getting starting, my CPA’s advice is to wait your first year so you can more accurately decide what your yearly earnings will be.

If you do decide to pay them and worry that you have given the wrong amount one quarter, don’t worry, when you make your estimate that’s exactly what it is, an estimate, nothing is set in stone.

  • Estimated your earnings too high/too low? Just complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter.

Track everything ESPECIALLY any possible deductions and keep your receipts.

How and When Do I Pay my Quarterly Taxes?

After you’ve calculated your quarterly payments, you can submit them online through the IRS direct pay. There are other ways but this is the easiest way to do it, and you won’t have to pay any convenience fees.

How Do I File My Annual Return?

Use Schedule C to report your income or loss.  Check out these instructions to help you fill it out.

4 Things I’ve Learned My First Time Filing Taxes as a Freelancer

1. Track Everything

Make sure you track all income, expenses, and deductions throughout the year. Use spreadsheets, QuickBooks, apps, whatever works for you.

2. Put Money Aside

My accountant advised that I put aside 30% from every payment I receive to put towards my taxes, but the new administration has given us Entrepreneurs a break this year, so it will really be less than that!

3. Deduct, Deduct, Deduct

Take advantage of your deductions and save. Make sure you consider these if you work from home:

  • A portion of your rent/mortgage/utilities/insurance
  • Internet
  • Phone Bill
  • Office supplies
  • Business mileage
  • Meals with potential clients
  • Business trips

4. Get yourself a good CPA

It might cost more, but they will help you take advantage of all possible tax deductions, credits and also better educate you on how to structure your business and finances to lower your future tax bills.

So there you have it.  Do you have a better understanding of how to file your taxes as a freelancer? Did you already know most of this or was I the only one living under a rock?

A woman wishing she knew more about filing her own taxes.

Freelancers: What to Know Your First Time Filing Taxes

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17 thoughts on “Freelancers: What to Know Your First Time Filing Taxes”

  1. These are very good pieces of advice. Filing taxes as a freelancer can be a daunting task, but if we are up to date and keep record of our earnings then it would be easier. I do mine quarterly so I don’t get overwhelmed.

  2. Jennifer Prince

    Ug! Taxes is one my least fave things about being an entrepreneur. It a nemesis each and every year.

  3. I too wish I had known all of these simple and basic common knowledge points when I first started working all those years ago. Luckily my husband has a friend who is a CPA, and he helps us out, and gives us suggestions. Great helpful post!

  4. This is such a useful post,you will be surprised how many people do not organise their accounts and then have a last minute panic or don’t budget to pay the tax.

  5. Great advice! I hate filing taxes but it’s a necessary evil. One day I will pay someone else to do them for me.

  6. Thanks for the advice. I assume that for cash back apps, surveys, and work that pays us in gift cards (or any of the work for that matter) we pay taxes on? By doing any of these online jobs are we considered freelancers/self-employed?

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