How to File Taxes as a Freelancer

Ah, tax season.

Really, there is nothing more amazing to me than how quickly tax season used to squash my freelancer excitement for life. There I was: all year, blissfully enjoying my freelance virtual assistant world, working from coffee shops and kitchen tables, eating donuts and showing up to client meetings wearing a messy bun.

But then reality hit. I have to do my taxes? Wah wah wah.

I should have seen it coming. I mean, duh Bree, doesn’t everyone have to do their taxes?

So there I was, wondering what on earth I needed to get this job done. It can’t be that hard… right? Actually, that’s right. I soon came to find that filing taxes as a freelancer was as simple as 1, 2, 3…4.

Below are four helpful tips to take the dread out of your tax season, so you can go on enjoying your cubicle-free, donut-eating lifestyle, on your time, your way.

I’ll break it down for you.

(Before I do, in case it doesn’t go without saying: we’re a virtual assistant company, not certified accountants. We know a thing or two about filing taxes as freelancers because many of us are freelancers ourselves. When in doubt, talk to a pro.)

1. Collect and Prepare Your Forms

The old Bree would say, “Sign me up for an automatic extension now please! ‘Collect’ and ‘forms’ are my top two go-into-immediate-paralysis words.” Then after a few times filing my taxes as a freelancer, I realized gathering your forms is not hard. You only need a few things:

1099 Forms From Your Clients

There are a handful of different kinds of 1099s, but for the majority of freelancers, you’ll need to collect the 1099-MISC form from any client who paid you $600 or more during the last calendar year. Keep an eye out for that mail of yours (both physical and digital–a lot of businesses create online tax forms now), and don’t hesitate to contact your client if it may be taking too long. You should have received all your 1099s by the end of January.

(If you work exclusively on a contract basis, you can expect to receive 1099s. But if you’re also a part-time or full-time employee at one of your gigs, you’ll also need to collect a W2 from that employer.)

EIN or SSN

Depending on what type of freelancer operation you’re running, you will need to have your employer identification number or your social security number to get the ball rolling with your tax preparer. Easy peasy!

You’ve got your forms. You’ve got your identification. Moving on!

2. Consider Potential Expenses and Deductions

This section is basically why freelancing is the best gig available. Sure, you have to pay taxes just like everybody else (don’t forget: for freelancers, your tax obligation is actually income tax + self-employment tax). But, this is where you get to write off a bunch of stuff that a “normal” job cannot give you. So here’s what I suggest.

Record Everything in Accounting Software

This is where I would highly recommend spending a tiny bit of money and investing in a great subscription to Quickbooks or Freshbooks—whatever strikes your fancy. You can hook them up to your bank and credit cards and import transactions all throughout the year. Then, come tax season, all your business expenses are neatly organized into understandable data your tax preparer can use. Then…

Categorize Your Expenses

After everything is imported into your system, you can classify every single purchase by topic. Meals, utilities, office supplies, the list goes on. The cool part about this—and why you should be excited—is these expenses are where the tax deductions start adding up. There are a ton of write-offs you can claim that slowly chip away at the tax chunk you think you may owe. You would be surprised at all you can deduct. When in doubt, check out this cool article that spells it out by category.

Once you get that all squared away, you’re ready to file your taxes or seek out some help!

3. Hire a Pro Who Understands Your Industry

I’ll have to say, using free or affordable e-filing services like Turbotax has been amazing, user-friendly, and confidence-building. (Look at me! I can do my own taxes! I’m an adult and a professional!) Even so, there are times where you feel like maybe it might be best to find someone that either has more time to do this stuff than you do or knows a little more about tax law. In either case, it’s time to hire a professional.

Ask Around or Search Online

Filing your taxes as a freelancer (or as a human, really) can be a surprisingly personal process since it involves sharing sensitive data. Knowing you’re working with someone recommended by people you trust will help decrease your stress. Because of this, I like to start by asking around. See which one of your friends has a great CPA they recommend working with or do a good ol’ Google search in your area.

Tax season is a popular time, so there probably won’t be a shortage of good accountants, and people are always willing to spread the love they have for their favorite CPA.

Hand Over the Goods

Help your accountant help you. Hand over a neat and tidy package (whether it’s physical or virtual) including everything we talked about above, and you should be flying free from then on out. You have done the legwork in the beginning, so sit back and relax while a professional makes the tax magic happen for you.

Finally, once everything is complete, it’s time for a tiny bit of follow up work.

4. Contact the IRS to Set Up a Payment Plan

Once you or your tax preparer has completed and filed your taxes, you may want to do just a little of loose-end-tying in order to lay the groundwork for next year.

Set Up a Payment Plan

As a freelancer, you will almost always owe money to the IRS during tax season. And if you haven’t been saving, or if you’ve never done this before, the dollar amount might come as a bit of a shock. This step isn’t necessary for all, but if you do end up owing, and you weren’t prepared, don’t fret! The IRS allows you to set up a payment plan that automatically deducts every month. I’ve had to do this before and to be honest, it was way easier than I imagined.

Set Up Quarterly Estimated Payments

To keep yourself out of the hole next year, consider setting aside some money out of each paycheck and filing quarterly payments instead of paying your taxes as a lump sum in the spring! It’s awesome, and it kind of gives you a little excitement around tax time because getting some money back becomes a possibility. That’s because often, the estimates are generous, so you might get some dough kicked back to you in the spring for once.

All in all, filing taxes as a freelancer can seem like a daunting, frightening task. I know because I’ve been there. I still remember the look on my dad’s face when I told him I was a 1099 contractor… Ha! But if you follow the steps above—do a little form collecting, data importing, and CPA searching—I promise you will not only get through tax season with a smile but look forward to the next one as well.

And if you need a hand sending out invoices and categorizing expenses this year, don’t hesitate to reach out to us! We can help!