How to Do Taxes as a Freelancer? A Beginner’s Guide

Instead, you’re in charge of tracking your earnings and expenses to filing your own returns and paying estimated taxes. 

But don’t panic, freelancer taxes don’t have to be scary once you understand the basics.

In this guide, we’ll walk you through on how to do taxes as a freelancer, including what income counts, what forms you’ll need, how to claim deductions, and when to pay. Whether you’re side hustling or full-time self-employed, these tips will help you stay organized and avoid costly penalties.

What Counts as Freelance Income?

Simply put, freelance income includes any money you earn through contract work or side gigs, regardless of whether it’s your main job or something you do in addition to a 9-to-5.

Freelance income can come from direct clients (local or international), freelancing platforms (e.g. Upwork, Fiverr, Toptal), payment apps (e.g. PayPal, Stripe, Venmo), bank transfers, crypto wallets, or even cash.

You’re required to report all of it, even if you didn’t receive a 1099-NEC. Remember, not all clients will issue formal tax documents, but that doesn’t mean the income is tax-free. Track everything and report gross income (total before deductions), then subtract eligible expenses to calculate net income.

Do Freelancers Have to Pay Taxes?

Yes. If you earn over the minimum threshold (generally $400 or more in net income in the U.S.), you’re expected to file and pay taxes. Freelancers must cover both:

• Income tax: Based on your total earnings and tax bracket
• Self-employment tax: Covers Social Security and Medicare contributions (currently around 15.3%)

In addition to federal taxes, you may also owe state and local taxes, depending on where you live or where your clients are based.

What Documents Do You Need for Freelancer Taxes?

Staying organized is key. Here are the documents you’ll need:

• 1099-NEC: Sent by clients who paid you $600 or more in a year
• Bank statements: Helpful for tracking payments not formally documented
• Invoices: Make sure you retain a copy of every invoice you send
• Receipts: For business-related expenses, including software, office supplies, or travel

Using digital tools like QuickBooks or FreshBooks can help you automate this process and keep everything in one place.

Tax Deductions Freelancers Can Claim

One of the best parts about being a freelancer is deducting business expenses to lower your taxable income. A tax deduction is an expense that directly supports your business.

Common deductible expenses include:

• Home office use (a portion of rent, utilities, internet)
• Phone and software subscriptions
• Office supplies, laptops, and hardware
• Business-related travel, meals, and lodging
• Marketing and advertising
• Courses or certifications related to your services

To maximize your deductions, track expenses year-round and keep copies of all receipts. This can make a big difference come tax season.

How to Pay Estimated Quarterly Taxes

Since no one is withholding taxes from your freelance income, you need to pay them yourself four times a year.

Quarterly tax due dates are:

• April 15
• June 15
• September 15
• January 15 (of the following year)

Failing to pay on time can result in penalties. To estimate your quarterly payments, take your total income from the quarter, subtract deductions, and calculate around 25–30% of the net amount to cover federal income and self-employment tax. 

Many freelancers set aside a portion of each payment in a separate account to cover taxes when they’re due.

Step-by-Step: How to File Taxes as a Freelancer

When tax season rolls around, here’s what you’ll do:

Step 1 

Gather all income records and deductible expenses.

Step 2 

Calculate your gross income and subtract expenses to determine net profit.

Step 3 

Fill out IRS Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax), then attach these to your Form 1040.

Step 4 

Submit electronically via tax software (like TurboTax Self-Employed) or mail a paper copy.

Step 5: 

Pay any outstanding taxes owed or request a payment plan if needed.

Tools and Software That Can Help

Luckily, you don’t have to do this alone. There are several digital tools that make tax filing easier for freelancers:

• TurboTax Self-Employed: Walks you through deductions and integrates with platforms like QuickBooks
• QuickBooks Self-Employed: Tracks income, mileage, and expenses
• FreshBooks: Great for managing invoices and time tracking

If your income is high or your deductions are complex – especially if you receive freelancer crypto payment – consider working with a tax professional to avoid mistakes.

What Happens If You Don’t File Freelancer Taxes?

If you miss a filing deadline or fail to pay your taxes, the IRS can issue penalties, interest, or even audit your accounts. Even if you can’t pay immediately, it’s better to file on time and work out a payment plan.

Delaying taxes only makes things worse, so set reminders and don’t wait until the last minute.

Freelancer Tax Tips to Avoid Stress

Here are a few simple habits that make a big difference:

• Track income and expenses monthly instead of yearly.
• Set aside 25–30% of every payment in a dedicated tax savings account.
• Use cloud-based accounting software with receipt scanning features.
• File early; tax season gets busier and more expensive the closer it gets to the deadline.

Also, choose freelancer payment solutions that offer good recordkeeping and reports. Some services, like Vellis or Payoneer, even summarize your annual earnings.

Learning how to do taxes as a freelancer might feel intimidating at first, but once you build a system it becomes second nature. Moreover, using the best payment method for freelancers makes tax season that much easier. Combine good habits with the right tools, and taxes won’t feel like such a mystery anymore.

Frequently Asked Questions (FAQs)

Do freelancers have to file taxes if they make under $400?

If total income is under $400, self-employment tax may not apply, but you may still need to file a return depending on other income sources.

What tax forms do freelancers file?

Most freelancers file Schedule C and Schedule SE, attached to Form 1040.

Can I deduct my laptop or phone?

Yes, if used for business purposes, you can deduct a percentage of the cost or depreciation.

Do I need to form an LLC to pay freelance taxes?

No, freelancers can operate as sole proprietors and still file taxes. An LLC offers liability protection but isn’t required.

How do I handle international freelance income?

You must report all worldwide income. Currency must be converted to USD, and foreign bank accounts may need to be disclosed.

What happens if I miss a quarterly tax payment?

You may owe a penalty and interest, but you can catch up by making the next payment on time and adjusting the amount.

References

Internal Revenue Service. (2024). Self-Employed Individuals Tax Center. https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

Intuit TurboTax. (2024). Freelancer taxes: What you need to know. https://turbotax.intuit.com/tax-tips/self-employment-taxes/freelancer-taxes-what-you-need-to-know/L5JjwpUxz

FreshBooks. (2024). Tax guide for freelancers and the self-employed. https://www.freshbooks.com/en-gb/hub/taxes/freelancers-tax-guide