Five Things You Need To Know About Freelance Taxes

As the gig economy continues to grow more and more, Americans are classifying themselves as freelancers. With this growth comes a level of ignorance of tax laws. Here are five things you need to know about freelance taxes:

All Income Must Be Reported―With or Without a 1099

Even if you never receive a 1099 from your employer you are still required to pay your taxes. It’s vitally important that you do what you can to keep track of every dollar you earn, because if you don’t, it could come back to hurt you in the long run and could also increase your chances of being audited by the IRS later in life.

Nothing Below $400 Should Be Filed

Did you recently make $100-$400 on a side project that you worked on for a neighbor? No worries. Anything that is under $400 does not have to be filed. Additionally, when you are classified as self-employed you have the ability to subtract your business expenses which in some cases could have you bringing in less than $400 in net profits.

You May Have to Pay Additional Taxes on Your Income

This is where things can get sticky. As a freelancer, you are both an employee and an employer which sadly means you are now responsible for not only paying the employee side of taxes but also the employer side.

Claim Your Expenses

Do you have a home office or a place in your home that you designate as some sort of home office? There’s great news! You can actually claim that portion of your expense. Additionally, you can also claim things such as rent, mortgage and property taxes. Items such as cleaning supplies may also be deducted under certain circumstances.

Don’t Be Afraid to Hire an Accountant

If you are unsure of how to handle your taxes as a freelancer don’t be afraid to hire an accountant. An accountant can work with you to make sure you are properly documenting and reporting all of your freelance income.

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