Your Freelancer Tax Guide for the US: How to File Smart and Plan Ahead

Whether you’re new to self-employment or a seasoned independent contractor, this guide will walk you through the essentials – from handling 1099 forms and reporting freelance income, to filing your tax return, understanding self-employment tax, and making the most of your deductions. This article will help you stay on top of your obligations and keep tax season as painless as possible.

Do freelancers have to pay taxes?

So, you’re freelancing – does it mean you're not on the IRS’ radar? Unfortunately, that’s not the case. As a freelancer, you’re responsible for keeping track of what you earn and what you owe. But don’t stress – this guide is here to help you navigate the world of taxes for the self-employed.

When you’re considered self-employed

If you don’t get a regular paycheck from an employer but earn money on your own, you’re considered self-employed – so this basically includes contractors, freelancers, and those with side hustles. If you’re your own boss and are invoicing other people for work you’ve done for them – be it writing copy, building websites, or taking photos – you’re legally self-employed.

Many people use the words “freelancer” and “self-employed” like they’re the same thing, but that’s not always correct. If we want to get technical, all freelancers are self-employed, but not all self-employed people are freelancers. Let’s explain it in super simple terms: a freelancer is someone who works on a project basis for different clients, and a self-employed individual can run their own business or work independently. In fact, if you have a 9–5 job and also earn money on the side, you’re both employed and self-employed.

The bottom line is – if you’re self-employed, you must report your income and pay taxes on it. 

Income thresholds and filing requirements

Here’s the rule of thumb for the US: if you’ve made $400 or more in net self-employment income a year, you have to file a tax return. This is the minimum threshold set by the IRS. 

It doesn’t matter if you received the payment through a bank transfer, in cash, platforms like PayPal, or an e-invoice – it counts as taxable income. And on top of that, some forms your clients send your way also go straight to the IRS – I’ll get into those later on in the article – so it’s not something that you can ignore. 

Anyway, even if you earned less than $400 in a year, it still might be worth filing. That’s because you could be eligible for tax credits or refunds. Plus, $400 isn’t the only threshold that matters. The IRS says you still have to file a tax return if you meet any other filing requirement listed in the Form 1040 instructions.

Federal vs state tax obligations

If you’re self-employed in the US, you have to deal with taxes at both the federal and state level. Let’s break it down. Federal income taxes apply no matter where you live, and they’re based on your total income, minus deductions and credits. 

State income tax depends on where you live. Some states, like Florida and Texas, don’t collect any state income taxes, while some, like Colorado, charge the same flat tax rate for everyone. Others, like California or New York, have income tax brackets – the more you earn, the higher your tax rate. On top of that, rules about deductions, filing deadlines, and how freelance income is taxed can also vary by state. So in other words, if you’re self-employed, where you live can really change your tax situation.

What taxes do freelancers pay?

Both freelancers and full-time employees have to pay federal taxes, and most usually state taxes. The big difference is that if you’re traditionally employed, your company usually handles all that behind the scenes. So if you’re self-employed, you have to take care of federal and state taxes by yourself, plus something extra called self-employment tax. Let’s unpack what this actually means for you as a US-based freelancer.

Income tax

This one is pretty straightforward, your income tax is the standard tax on the money you earn. Since you’re your own employer, your taxes aren’t withheld automatically from each paycheck, meaning you have to do the math and set that money aside manually.  This entails tracking what you earn, subtracting any allowable deductions (more on those later), and figuring out how much you owe the government and the state you live in, if applicable.

In the US, federal income tax is progressive (and depending on where you live, your state tax could be too). This means that the more you earn, the higher the percentage you’ll owe.

In the US, April is the end of the individual tax filing period. This is when traditionally employed people file their returns. Since their taxes have already been withheld by their employers throughout the year, filing in April is more about reconciling what’s already been paid on their behalf. But if you’re freelancing, the IRS expects you to pay as you go. This means you have to make estimated payments every quarter, rather than just one big lump sum in April. If you underpay or miss these quarterly payments, you could be hit with penalties and interest when tax season comes.

Self-employment tax (Social Security + Medicare)

Since you’re self-employed, you’re also picking up the tab for Social Security and Medicare taxes, which together make up the self-employment tax of 15.3%. 

Here’s the breakdown:

• 12.4% goes towards Social Security (on up to $176,100 of your net earnings)
• 2.9% goes to Medicare

And that’s not all! If you’re self-employed and your net earnings exceed $200,000 (or $250,000 for married couples filing jointly), you’re also on the hook for an extra Medicare tax of 0.9%, on top of that 2.9% all self-employed folk pay.

If you’re a W-2 employee, 7.65% is automatically withheld from your paycheck for Social Security and Medicare, and your employer matches that with another 7.65%, bringing the total to 15.3% (just like the self-employment tax). When you’re self-employed, you’re responsible for paying both halves. The good news here is that you’re allowed to deduct the “employer” half (7.65%) when calculating your income tax. You’ll still have to pay the full 15.3%, but it does lower your taxable income when you calculate your federal income tax. So, basically, the self-employment tax can feel steep, but there is some relief built into it.

Estimated taxes and quarterly payments

Earlier on in this article, I mentioned that as a freelancer, you have to pay your taxes as you go, not just once a year in April. This is where estimated taxes come in. 

What estimated tax payments are

Estimated tax payments are exactly what they sound like – payments you make to the IRS throughout the year based on how much income you expect to earn. If you’re traditionally employed, the IRS gets its money throughout the year, not just in April. The same principle applies if you’re self-employed, so you have to make these payments yourself four times a year.  

How to calculate your quarterly payments

Quarterly payments are based on your total expected annual income. The general idea is to estimate how much tax you’ll owe in total for the year, including income tax, state tax (if applicable), and self-employment tax, and divide that number by four.

Of course, the very nature of freelancing means that your income might not be predictable. One month you might be swamped with projects, the next it’s radio silence. If you find that your income fluctuates, you don’t have to pay the same amount every quarter – the IRS lets you calculate your taxes based on what you actually earned. This approach is called the annualized income installment method. Just make sure you’re keeping accurate records and paying attention to IRS deadlines.

Important IRS deadlines to remember

The IRS doesn’t just expect you to pay four times – it wants you to do so according to their own schedule. Here are the due dates for quarterly payments for freelancers for 2025.

If a deadline falls on a weekend or holiday, it moves to the next business day. And if you’re using the annualized income method I mentioned earlier, just be sure your payment timing lines up with your actual income.

If you’re freelancing, April 15 isn’t just the due date for your first estimated payment for the current tax year. It’s also the deadline for filing your annual tax return for the previous year, and making any last-minute contributions to certain retirement accounts.

These aren’t the only dates to keep track of in your calendar. You should also be mindful of the following:

• January 31. This is when clients must send you your 1099-NEC or 1099-K forms for the previous year. I’ll get to what these forms are in the next section of this article.
• October 15. If you’re not ready to file your annual return for the previous year by April 15 for whatever reason, you can request an extension with the IRS. This gives you a six-month extension and pushes your filing deadline to October 15. 

What forms do you need to file?

There’s a lot of paperwork involved in being a freelancer. The IRS needs a paper trail of how much you made, what you spent, and what you still owe, which means filing several key forms every year. While it’s tricky at first, once you understand what they’re for, it all starts to make more sense. Let’s walk through the most important ones.

1099-NEC, 1099-K, and other common forms

As a freelancer, you’re not just submitting forms – you’re also receiving them from clients. These forms summarise how much you were paid and are sent to both you and the IRS. The most common ones you’ll encounter are 1099-NEC and 1099-K. 

1099-NEC (which stands for non-employee compensation) is the most common form for freelancers. If a client paid you $600 or more directly, i.e. via bank transfer or cash,  over the course of the year for services, they’re legally required to send you (and the IRS) one of these by January 31. You’ll get one 1099-NEC from each client who meets the $600 threshold. Think of 1099-NEC as a record of what you’ve earned – you don’t need to file it, but it helps you keep track of things. Don’t forget, though, even if you don’t get a 1099-NEC from a client (if they paid you less than $600, for example), you still need to report it to the IRS!

1099-K is the form you’ll get if you’ve earned money through third-party platforms like PayPal, Venmo (for business), Etsy, eBay, Uber, and other online marketplaces or apps. If your total payments from these platforms for goods or services add up to more than $2,500 in 2025 (this threshold is going to drop to $600 in 2026), the platform is legally required to send you and the IRS a 1099-K by January 31. You’ll get one 1099-K from each platform that meets the threshold. Here’s a tip: some states, like Virginia, have their own 1099-K thresholds that differ from the federal one. Be sure to check your state’s tax authority website for more info.

Like with 1099-NEC, you don’t need to file this form yourself – it’s a record of what you’ve earned.

One quick note: you shouldn’t receive both a 1099-NEC and a 1099-K for the same payment. If a client paid you through a platform like PayPal or Etsy, that platform is responsible for reporting the payment via a 1099-K – not the client. But mix-ups happen, so if you do end up with both forms for the same income, make sure to keep clear records and avoid reporting it twice on your tax return.

There are other forms you could encounter as you freelance. For example, 1099-MISC is used for things like rent, royalties, awards, or prize money. Also, if you’re traditionally employed at the same time, you’ll have to deal with a W-2. That income is reported separately from your freelance earnings when you file your return.

Schedule C and Schedule SE

The forms we just discussed are the forms you receive, which help you keep track of your earnings. Now let’s check out the forms you file – in other words, the forms you submit to the IRS yourself to report your income and calculate your taxes.

Schedule C is the form you use to report your freelance income and business expenses. It’s kind of like your profit-and-loss statement for the year. In this form, you list how much you earned, and how much you spent on keeping your business running – such as software or equipment. Then, you calculate your net profit, which is the number the IRS uses to figure out how much tax you owe. 

Schedule SE is the form used to calculate your self-employment tax – that 15.3% that goes toward Social Security and Medicare. It takes the profit from your Schedule C and figures out how much self-employment tax you owe. When it comes to income tax, the IRS lets you deduct the “employer” half (7.65%) of your self-employment tax to reduce your taxable income. You don’t have to do anything extra to claim this deduction, it’s built into the form and applied automatically when you file. This doesn’t reduce the self-employment tax itself – just your income tax liability.

Let’s visualise all of this with an example. 

Let’s imagine you, as a freelancer, earned $40,000 in one year. You also spent $5,000 on business expenses. So, your net profit is $35,000. These are the figures you have to record in your Schedule C. Then, you take your net profit of $35,000 to your Schedule SE, calculate the self-employment tax (in our case, $35,000 x 15.3% = $5,355) and report it through the form. That’s what you owe in self-employment tax. Half of that, $2,677.50, gets deducted from your taxable income when calculating your federal income tax. This is what we call a deduction – more on those later.

Other IRS forms to know

Here are some other IRS forms you’ll need to be familiar with when filing.

• Form 1040. This is the main tax return form – everyone fills it out, freelancer or not. All your income, deductions, and taxes owed (or refunded) flow through this form. It’s basically your summary of the financial year.
• Form 8829. If you’re working from home and want to file a home office deduction, this is the form you’ll use for that.
• Form W-9. You’ve probably been asked to fill this out by a client before they pay you. It’s not something you file with the IRS, but it gives clients your taxpayer information.

Deductions and expenses for freelancers

Here’s the part where things get a little less painful for the self-employed. A lot of your business expenses can be deducted, which means you’re only taxed on what you actually make, not what you spend to make it. And a lot of things can fall under this category – be it software, your internet bill, or even part of your rent. Basically, deductions are one of the biggest perks of freelancing.

Common deductible business expenses

If you spend money to run your freelance business, there’s a good chance it’s tax-deductible. The IRS rule is simple: if it’s ordinary and necessary for your work, you can probably write it off. Here are some common examples:

• Office supplies: pens, paper, postage, printer ink, and so on.
• Software: anything from design tools to Zoom.
• Education: job-related courses, books, conferences.
• Professional services: accountants, legal help
• Payment fees: PayPal, Stripe, business bank account charges.

You get the point. You can also deduct things like marketing costs, web hosting, business travel, or part of your phone bill – basically anything you need to keep running. 

Usually, people in the creative industries don’t see life as something separated between personal and business. Everything is business for them. But unfortunately, in the IRS’ eyes, in the tax authorities’ eyes, it’s not the same.
So it means you have to be more careful about separating personal and business expenses. For example, when somebody says, “I purchased this suit because I need to look good, I’m a creative, I’m meeting with important people,” — that doesn’t count as a deductible.
So unless you’re a model, and you purchased an outfit directly for a shoot, and you do not reuse it after that — in this case, you can deduct it. But in other cases, you can’t.

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The home office deduction

If you’re working from home and have a space set aside for just work-related activities (as in, not your bed or your kitchen table), you might be able to deduct part of your rent, utilities, and internet. The IRS does take this one with a bit more scrutiny. While there’s no official IRS inspection, if you’re ever audited, they’ll want to see proof that this space is real, consistent, and only for work.

The home office deduction is also often overlooked, but that one is very tricky.
According to the IRS, it needs to be a dedicated area — like a separate room, a specific couch you only work on, or a desk you use just for work. You don’t eat there, you don’t sleep there. And that’s where a lot of people get confused.
So the way it goes with the IRS — we went to a couple [of audits] — they’re going to ask for the apartment map. You draw the map and show where the desk is located, and you show the specific square footage.
As long as it’s reasonable —, not “I have a 500-square-foot apartment and 400 is my workspace” — that’s not going to work. But if it’s 100 out of 500, that’s pretty reasonable. And as long as it fits on the map, the IRS is reasonable too.
We’re all people in the end. You can also show pictures of the desk to show it’s set up for business purposes and doesn’t just look like a kitchen table.

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Here’s a diagram from the IRS to help you determine if you qualify:

For your home office deduction, you have two options: 

• A simple method ($5 per square foot, max 300 square feet)
• The actual expenses route, where you calculate what percentage of your home is used for work and apply that to eligible costs.

Check out this video from TurboTax to really understand what expenses you can deduct when working from home:

How to keep good records (and why it matters)

The IRS doesn’t ask you to send in receipts with your tax return, but that doesn’t mean you can skip the paperwork. If you’re ever audited, they’ll want to see proof of your deductions: what you earned, what you spent, and when. This is why keeping good records is really important for freelancers. Here are a few tips you may find helpful.

• Keep receipts and invoices. You don’t need paper copies of everything; digital is fine, but make sure they’re organized.
• Track income and expenses. Don’t wait until April to figure out what happened last June.
• Use a separate bank account. Opening a new bank account for all of your freelance stuff makes everything cleaner and easier to track.
• Consider going digital. There are many bookkeeping apps out there, like QuickBooks, but you can also just use a simple Google Sheet. Whatever works, as long as you’re consistent.

Keeping good records isn’t just important if the IRS decides to audit you. It also makes it easier for you to understand your business.

When someone shows up at the end of the year with ten different checking accounts and ten different credit cards, it’s impossible to get everything cleanly. Then we end up playing a guessing game.
So I always recommend: separate bank account, separate credit card — even if you’re a sole proprietor. Just open a separate account and credit card in your personal name, and use those for business.
That way, if the IRS audits you and wants to check your freelance activity, they’ll ask for your bank and credit card statements. If we can pull twelve months of statements, add it all up and say, “Okay, here are the deposits — we recorded those as revenue. Here are the expenses.”
How we categorize and deduct them is a separate discussion, but at least the numbers add up to what the IRS sees. If you made $100 and wrote off $90 in expenses, we can point to that $90 in the statements…
Compare that to showing up with 12 months of statements from 12 different accounts — that’s 144 statements. And each one is 10 pages long. Then you start highlighting, “This is personal, this is business, this is personal…” It becomes impossible. One bank statement, one credit card, exported to Excel — summarize it. That’s it.

{{Stan Kosyakovskiy}}

Planning ahead: retirement and savings

Freelancing means you don’t get a built-in retirement plan. Saving money aside for the future isn’t just a good idea for later; it can also shrink your tax bill now.

Tax-advantaged accounts for freelancers

If you’re self-employed, you don’t get a 401(k) just handed to you, but there are still solid options for building your retirement savings and lowering your taxable income. You can still save for retirement and lower your tax bill using accounts like a SEP IRA, a Solo 401(k), or a Traditional IRA, which are all designed with self-employed folks in mind. In fact, we have an article covering all of these and more: check out our guide to freelance retirement plans for a more in-depth look. 

How retirement contributions lower your tax bill

When you deposit money in one of the tax-deferred accounts mentioned above, those contributions are subtracted from your income before the IRS calculates how much tax you owe. There are annual limits, but in general, the more you contribute, the less you’re taxed. Let’s imagine your taxable income is $60,000, and you deposited $6,000 into a Traditional IRA. In the IRS’ eyes, your income is now $54,000, meaning there’s less income to tax.

What I’ve noticed is that a lot of people in the creative world don’t really believe in the future. They’ll say, “I don’t know where I’m going to be in ten years,” and many of them don’t even think about retirement savings accounts — which, with proper planning, can be a big number.

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Filing your return

You’ve worked hard to track your income, to tally your expenses, to contribute to your retirement account. Now it’s time to actually file – even though you pay quarterly taxes throughout the year, your annual tax return still happens in April, just like everyone else. The goal here is to submit everything as accurately as possible and on time.

DIY vs hiring a tax pro

If you have no employees and no complicated investments, your filing could be pretty straightforward and you could take care of it yourself. Plenty of freelancers use software like TurboTax, H&R Block, Cash App Taxes, or FreeTaxUSA to get it done. These platforms help you file your taxes by walking you through each platform step-by-step. Some even let you file for free if your case is simple. 

When you’re using software like that, it’s less about filling out forms and more like answering a long questionnaire. You enter your income, expenses, and deductions, as well as import or upload forms you received from customers like 1099-NEC . The software automatically fills out the correct IRS forms like Schedule C, SE, and 1040 by itself.

If you really want to, you can also fill everything out by hand on paper and mail it to the IRS, but I don’t recommend it.  Filing online is easier and faster, and also gives you fewer chances to mess up.

It goes without saying, but if you want to file by yourself, even with tax software, you still need to understand your tax situation. If you’ve got multiple income streams, complex deductions, or just don’t want to deal with the stress, hiring a tax professional can be well worth the cost.  So, how do you find a tax pro to give you the peace of mind when April rolls around? Ask other freelancers or small business owners for recommendations – referrals are worth their weight in gold. You can also search through directories like the IRS’s official tax preparer directory, or check sites like NAPFA, XY Planning Network, or CPAverify.org.

When it comes to filing your taxes yourself or hiring someone to help, there’s no right answer. If you’re confident you understand everything correctly and like doing things yourself, using tax software is a solid option. But if the very thought of doing taxes gives you hives, you’re better off with a certified public accountant.

What to do if you can’t pay your tax bill

Before the pandemic, the penalties and interest for not paying estimated taxes were tied to the government-set interest rate. And that rate was almost zero. So when people didn’t pay estimates and got hit with, say, a $10 penalty on a $100,000 bill, nobody paid attention. People just got into the habit of not paying and waiting until the end of the year…
Now, the interest rate is much higher — generally, interest accrues on any unpaid tax from the due date of the return (without any extensions) until the date of payment in full. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest compounds daily. The amounts are sizeable. People feel it. Sometimes they’re really surprised when they get the bill.
So what I always tell [my clients] is: you get the check, open another savings account — either in the business name or under your personal name. And put 20% in there, just directly, before you start spending it. Take 20% of the amount and move it to savings. Then when the quarter comes, you’re ready to pay it.

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If you’re behind on your estimated quarterly payment, don’t panic. You don’t need to file anything special, but expect a small underpayment penalty from the IRS when you file in April. If you can’t pay the quarterly amount, pay as much as you can – even a partial payment helps reduce penalties. And if you can’t pay anything at all, try to catch up later in the year. The key thing is to still file your return on time.

Interest and penalties are calculated based on the balance that’s outstanding — and from the day it becomes outstanding.
So even if you don’t have the full amount right now — say, the first quarter is due April 15 — pay what you can. Don’t wait for the second quarter and try to pay both together … Keep paying toward the first quarter the minute you get the next check, because it all helps reduce the balance.
If you look at how the IRS calculates it, they basically say: here’s the due date for the estimate, here’s what was owed, here’s how much was missed — and then they start accruing daily. It’s not like they charge you one penalty for the year. So the longer you wait, the more you pay.

{{Stan Kosyakovskiy}}

To sum it all up 

Being a freelancer is difficult enough as it is – don’t make your life even more difficult by worrying about taxes. Start with the basics:

• Track your income and expenses throughout the year.
• Use tax software or hire a tax professional.
• Do your best with quarterly payments and don’t forget to file in April.
• Open a retirement account and contribute when you can. 

Don’t forget, taxes are only one piece of your financial puzzle as a freelancer – if you haven’t already, check out our guide on how to budget as a freelancer. 

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