GOOD READS

Filing Taxes As A Freelancer

Freelancing is a business and the way you will handle your taxes working as a freelancer will be different than someone who is solely employed by a corporation. If you are working full-time as a freelancer, whether it is as a computer consultant, writer, artist or any other job, there are several things to keep in mind.

Deductions
If you are taking continuing education courses related to your work, these are tax-deductible. Organization dues and membership fees, car expenses, travel expenses, professional journals , healthcare, advertising expenses, computers, printers, software, hardware, office furniture, paper and pens are tax-deductible. Business-related expenses like a business telephone line, Internet connection, web domain registrations and hosting fees, and "working meals" are deductible. Working meals are expenses you incur while eating with a colleague or client while at a business-related meeting. Commuting is not tax-deductible; this includes travel from home to your first place of business and back home from your last place of business. The IRS website has an entire section on self-employed filers and Sisterstates.com links to all state tax sites.

If you are not doing your own taxes, make sure you get a good accountant who specializes in small businesses and knows how to deal with freelancer returns. It's important to select someone who knows the ins and outs of home related tax-deductions. If you have a home office, a portion of your rent and utility expenses is deductible. Because home-related deductions are generally a big portion of your deductions, you'll want to work with someone who will get these calculations right. Also, in order to deduct a home office, you need to have a profit. If you own a home and have a home office, you also need to account for depreciation. Check out Form 4562 and Publication 946 for help in determining how to depreciate an asset.

Forms to File
Freelancers need to file, at a minimum, Form 1040 and Form 1040 Schedule C for sole proprietorships, depending on their particular situation. It's important to file taxes as a sole proprietor because doing this enables filers to deduct business expenses.

According to Howard J. Samuels, CPA, MST and Managing Tax Partner at KDMS LLC, self employed health insurance is fully deductible on page one of the 1040 as an adjustment assuming your profit is more than the insurance. In New York City and surrounding suburbs, if you make a profit over $10,000, you'll also need to file NY Form MTA-6 (semi-new metropolitan tax). If your profit is over $100,000 and you are located in the city (any of the boroughs), you'll need to file forms and pay NYC Unincorporated Business Tax ("UBT") says Samuels. Make sure you find out the appropriate forms to file within your current location if you live outside of NYC and surrounding suburbs.

Keep a few things in mind. Samuels says that if you receive a W-2 (taxes withheld) instead of a 1099 (no tax withheld), then this is not freelance income, but rather you are an employee. The deductible expenses against employee income are limited compared to expenses for 1099/freelance income which have much fewer limitations. Be aware that as a W-2 employee, the employer pays half the self employment (Social Security) tax and you pay the other half through your paycheck. As a freelancer, you pay both portions since you are deemed to be the employer and the employee.

Everyone has to pay this on income/profit they earn says Samuels. "As an employee, the employer pays half and half out of your paycheck. As a freelancer, you pay it all. Overall it is about 15% in total," he says.

The Bottom Line
It's important to know the difference between what you can file as an employee and what you can file as a freelancer. Freelancers can deduct more than regular employees, so there are certain advantages to freelancing. Consult your accountant to find out exactly what is tax-deductible.



More From Investopedia

Quiz: How well do you know India's economy?

Question 1

Which of these products is India the world's largest producer of?

Poll Choice Options
  • Wheat
  • Rice
  • Milk
1
2
3
4
5
6
7
8
9
10

Latest News

  • India's GDP quadrupled in 10 years under UPA: Anand Sharma

    Mumbai, April 19 (IANS) India created a world record of quadrupling its GDP in the past 10 years under the two UPA governments, Union Commerce Minister Anand Sharma said here Saturday. In contrast, even during the industrial revolution, countries like the US, Britain or Germany could not double their GDP in 10 years. Japan was the first country which doubled its GDP in a decade while China broke it by tripling its GDP in a decade, Sharma said, citing various reports, including the Reserve …

  • Laundry Project India to expand operations

    Chennai, April 19 (IANS) Corporate clothes launderer Laundry Project India plans to expand its business operations by setting up operations in Pune and National Capital Region (NCR) this year and also venture into leasing of linen and corporate uniforms, said a top company official. The organised laundry market size in India is around Rs.5,200 crore as per KPMG study," R.Balachandar, founder and CEO, told reporters here Saturday. He said while most of the corporates in this segment are …

  • Goa Congress unhappy with Karnataka unit over water dispute

    Panaji, April 19 (IANS) The Congress in Goa Saturday said it will ask its party's government in neighbouring Karnataka to fall in line over a water dispute being heard by a central tribunal. Congress spokesperson Durgadas Kamat told a press conference that the Karnataka government was defying a recent Mhadei Water Disputes Tribunal (MWDT) decision to erect a wall across a canal, built to divert water from the Mhadei river to the Malaprabha basin in the state. We will speak to the Congress …

  • CBI probe sought into Vadra's land deal

    New Delhi, April 19 (IANS) A plea has been filed in the Delhi High Court seeking a CBI probe into licences granted to several real estate developers, including the one with which Congress chief Sonia Gandhi's son-in-law Robert Vadra's Skylight Hospitality Pvt. In the plea, he contended that allocation of licences for developing colonies was contrary to provisions of the Haryana Development and Regulation of Urban Areas Act, 1975. The plea also sought quashing of the June 3, 2013 letter by …

  • Will Nehru-Gandhi dynasty reboot or fade out?

    Narendra Modi is not far off the mark when he says that the May 16 results will be the Congress's worst. It must be mortifying for the Congress that this figure has become something of a psychological marker. The only consolation for the Congress will be that such wild swings of fortune are not unknown in Indian politics. For the Congress, however, the focus has to be on the post-poll scenario since a defeat is staring it in the face. …

IN-DEPTH ANALYSIS & INTERVIEWS

  • This might well be India’s biggest Ponzi scam

    It was just too good to be true. Ashok Khital, 45, displays every symptom of a man who knows he's been conned. …

  • India's star studded football league

    High and mighty including Sachin, Salman & Sun Group buy ISL teams …

  • Leaderspeak with Rajesh Janey

    Rajesh Janey, President - India & SAARC, EMC shares many firsts in his life. …

  • Seed of Doubt

    Field trials have been allowed again in India. But two decades after their global launch, genetically modified (GM) crops remain controversial. …

  • Power Hungry

    Gujarat has power round-the-clock. Most other states do not. Why this will matter in the general elections. …

  • Etcetera

    The most keenly watched contest of the current general election will be the one for the Varanasi parliamentary seat, where the Bharatiya Janata Party's prime ministerial hopeful Narendra Modi squares off ... …

  • Economy vs Democracy

    As the country gets election fever, cash comes out of mattresses and turns into liquor, gifts, and food. But it is not bad for the health of the economy, reports Sarika Malhotra from the trenches. …

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    16.52+0.88+5.63%
    UNITECH.BO
    73.85+3.05+4.31%
    HDIL.BO
    13.36+0.25+1.91%
    SUZLON.BO
    718.55-6.70-0.92%
    HDFCBANKSL.BO
    57.40+2.75+5.03%
    JAIPRA.BO
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
    12.60+2.10+20.00%
    AGRIMONY.BO
    242.50+40.40+19.99%
    ACRYSIL.BO
    83.50+13.90+19.97%
    SICAL.BO
    46.00+7.65+19.95%
    SHRGLTR.BO
    65.25+10.85+19.94%
    AHLUCONT.BO
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    11.60-2.70-18.88%
    ANISHAIMPEX.BO
    51.10-8.85-14.76%
    WINSOMTX.BO
    11.70-1.30-10.00%
    BLCISER.BO
    425.00-40.00-8.60%
    GCMSECU.BO
    59.40-5.55-8.55%
    JBML.BO
  •  
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

    •  
      Sign-in to view quotes in your portfolios.