The Forms Must Be Obeyed: Taxes for the Freelancer

The most eye-opening thing (financially) to being a freelancer is that you get paid in full by your employers/customers–no taxes taken out–and then you have to set aside money from whatever you’re paid and write quarterly checks to the government for estimated payments (this is for U.S. citizens–unfortunately I have no idea how things work elsewhere). I’m starting to gather up paperwork to close out my 2018 tax year, so I thought I’d walk you through some of the basics. FAIR WARNING: I am NOT a tax attorney, CPA, or financial professional, so I highly recommend you contact one if you have questions about your taxes.

The Filing Schedule

Uncle Sam collects taxes based on the calendar year, fortunately–the federal fiscal year starts October 1. The quarters are, obviously, January-March, April-June, July-September, and October-December. If you are filing quarterly estimated payments–and you’re required to, if you declare yourself to be self-employed–those payments are due on the 15th of the month following the quarter’s end. Therefore, your quarterly filing dates are as follows:

Q1: April 15
Q2: July 15
Q3: September 15
Q4: January 15 OR April 15

That last one can be a bit tricky, and I had to have my tax accountant explain it to me a couple times before I “got it.” For the fourth quarter of the year, you can send your quarterly estimated payment in January and hope for the best (mainly, that you paid correctly or slightly over the requirements) so that you don’t end up paying a lot more when your year-end taxes are due by April 15.

However, you can hold also off on finalizing Q4 and the rest of the year until April 15, which is the regular tax deadline for everyone else. You might as well, just to give yourself some time–because even if you submit an estimated payment by mid-January, you don’t have all of your 1099 forms (for miscellaneous income, pronounced “ten-ninety-nine”) from your employers yet. And if you make more than $600 from any given employer, they are required to send you a 1099 to show that they paid you, just as you are required to report the income.

April can be a little hectic, of course, because you’re finishing off the previous year’s taxes and making your estimated payment for Q1 of the current year.

Forms of Taxation

If you tell the government that you’re self-employed, you have to submit a separate self-employment tax form (Schedule SE) plus a standard personal tax form (1040) and a form for itemizing business income and expenses (Schedule C).

  • Schedule SE is required because you need to ensure that you are making the full contribution to Social Security (Federal Insurance Contributions Act or FICA) and Medicare. If you’re a regular full-time or part-time employee instead of a contractor (1099) worker, the employer automatically deducts Social Security/Medicare tax dollars from your paycheck and contributes 50% of that charge. So while you might pay an average of 3.25-3.5% for FICA as an employee, as a contractor, you’re paying the full 6.5-7%.
  • Form 1040 is the form most Americans working part or full time file every year. After you’ve accounted for your tax obligations for FICA/Medicare, you still have an obligation to pay whatever the government deems appropriate for your household status, income level (see below or here for more details), and other circumstances.

Single

Taxable Income Tax Rate
$0 – $9,525 10% of taxable income
$9,526 – $38,700 $952.50 plus 12% of the amount over $9,525
$38,701 – $82,500 $4,453.50 plus 22% of the amount over $38,700
$82,501 – $157,500 $14,089.50 plus 24% of the amount over $82,500
$157,501 – $200,000 $32,089.50 plus 32% of the amount over $157,500
$200,001 – $500,000 $45,689.50 plus 35% of the amount over $200,000
$500,001 or more $150,689.50 plus 37% of the amount over $500,000

 

Married Filing Jointly or Qualifying Widow(er)

Taxable Income Tax Rate
$0 – $19,050 10% of taxable income
$19,051 – $77,400 $1,905 plus 12% of the amount over $19,050
$77,401 – $165,000 $8,907 plus 22% of the amount over $77,400
$165,001 – $315,000 $28,179 plus 24% of the amount over $165,000
$315,001 – $400,000 $64,179 plus 32% of the amount over $315,000
$400,001 – $600,000 $91,379 plus 35% of the amount over $400,000
$600,001 or more $161,379 plus 37% of the amount over $600,000

 

Married Filing Separately

Taxable Income Tax Rate
$0 – $9,525 10% of taxable income
$9,526 – $38,700 $952.50 plus 12% of the amount over $9,525
$38,701 – $82,500 $4,453.50 plus 22% of the amount over $38,700
$82,501 – $157,500 $14,089.50 plus 24% of the amount over $82,500
$157,501 – $200,000 $32,089.50 plus 32% of the amount over $157,500
$200,001 – $300,000 $45,689.50 plus 35% of the amount over $200,000
$300,001 or more $80,689.50 plus 37% of the amount over $300,000

 

Head of Household

Taxable Income Tax Rate
$0 – $13,600 10% of taxable income
$13,601 – $51,800 $1,360 plus 12% of the amount over $13,600
$51,801 – $82,500 $5,944 plus 22% of the amount over $51,800
$82,501 – $157,500 $12,698 plus 24% of the amount over $82,500
$157,501 – $200,000 $30,698 plus 32% of the amount over $157,500
$200,001 – $500,000 $44,298 plus 35% of the amount over $200,000
$500,001 or more $149,298 plus 37% of the amount over $500,000

You also get to deduct a certain amount from your taxes, which I believe is more or less the cost of living.

Filing Status Standard Deduction
Single $12,000
Married Filing Jointly or Qualifying Widow(er) $24,000
Married Filing Separately $12,000
Head of Household $18,000
  • Then, of course, you’ve got your Schedule C, which itemizes your income and expenses and records if you’ve made a profit or taken a loss. If you’ve had a particularly bad year and/or higher-than-usual expenses, you’ve ended the year at a loss, you would not have a tax obligation on top of that. However, if you can’t manage to make a profit after a certain number of years (and don’t meet several other requirements), Uncle Sam will treat your “business” as more of a hobby.

Your total tax bill, then, takes into account your FICA, Medicare, business profits/losses, and personal exemptions.

Other Tax Thoughts

Given the sheer number of forms–made extra complicated if you have more than one employer–in my view it’s worth the effort/expense to take all your paperwork and pay H&R Block or a licensed tax accountant to handle my taxes.

Having a professional tax preparer submit your taxes has a couple benefits:

  • You can hand them all the forms and let them take the time to fill out the forms.
  • Tax preparation fees are tax deductible.
  • They know the laws and forms better than you so they might be able to find deductions you might miss. They are also less likely to make errors that create problems later.
  • If you are audited, they will meet with the IRS face to face so you don’t have to.
  • Assuming you’ve given them complete, legitimate information, they are the ones held legally liable if there are issues.

Anyhow, the tax season will start in earnest in March…are you prepared?

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About Bart Leahy

Freelance Technical Writer, Science Cheerleader Event & Membership Director, and an all-around nice guy. Here to help.
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