What Freelancers and Gig Workers Need to Know About Taxes

How Do Taxes Work for Freelancers and Gig Workers in the U.S.?

This is part of our Guide to the Law for Freelancers in the U.S.

Freelancers (aka gig workers or independent contractors), as self-employed individuals, are considered a small business, which means taxes work differently from employees. Some basic differences are that your taxes are generally not withheld when you get paid, as you are responsible for tracking and paying your taxes. You must make sure to pay federal, state, and possibly local taxes each year.

Keep track of all income and expenses, along with receipts. Your clients may ask you to fill out a W9 form, which then allows them to send you (and the IRS) a 1099 form each year showing how much they paid you. But even if you do not, you must still report what you have been paid.

What taxes do I have to pay as a freelancer?

Freelancers must pay various types of taxes, including:

  • Federal personal income tax
  • Self-employment tax (15.3%)
  • State taxes (most states)
  • Local business tax and other taxes (depending on the city or county)

When do I pay tax as a freelancer?

As a freelancer or small business, you actually must pay taxes 4-5 times per year, not just once!

If you do NOT have a corporation or LLC (you are a “sole proprietor”), or if you are the sole owner of an LLC: you are generally required to file your tax return (and make payment) by mid April, and then make “estimated” quarterly payments without filing a return by mid June, mid September, and mid January. It’s usually the 15th of the month, but if the due date falls on a Saturday, Sunday or legal holiday, the payments are due the next business day.

If you have an LLC with multiple owners, or you have a corporation: you are generally required to file your LLC/corporate tax return (and make payment) by mid March, then your individual tax return (and make payment) by mid April, and then make “estimated” quarterly payments without filing a return by mid June, mid September, and mid January.

Do my clients need to send me any tax forms at all?

A business client which paid you $600 or more within a calendar year is required to send you a Form 1099-MISC or 1099-NEC (“1099”) by the following Jan 31 (but even if they don’t, you still must report the income on your taxes), and the business must file the 1099 with the IRS by Feb 28.

To help them fill out the 1099, your business clients may ask you to fill out a W-9 form, which asks for your basic information, including social security number.

However, if you as the freelancer are incorporated (not including LLCs), the business does not need to do the 1099.

The 1099 requirement only applies to clients who have used your services for their business, not for their personal use.

Do I need to send any tax forms for freelancers/subcontractors I hire?

Same as above, but you are the business client, and they are the freelancer. Note: If you have employees, you would generally withhold taxes from each paycheck, and send a W-2 the following year by Jan 31.

What do freelancers need to know about state and local taxes?

Depending on your state and city, you may have additional state and local tax requirements. Many states and/or localities require you to have a business license, which is how they collect taxes from businesses. But often there are exemptions for small business.

What tax deductions and credits are available for people who are self-employed?

See our Guide to Self-Employment Taxes.

Related Pages

Guide to the Law for Freelancers in the U.S.

What All Taxpayers Need to Know

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