A Tax Guide for Freelancers and The Self-Employed


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Freelancing is a great opportunity to earn extra money, but keeping your taxes in order can also be tricky.

If you are a freelancer working with the IRS, you know how important it is to get your tax return on time and correctly. Not only does it help keep you out of trouble with the IRS, but it also makes sure that everything stays on track for next year’s taxes as well.

It’s not uncommon for freelancers to find themselves in debt with the IRS. Whether it’s a result of misreporting expenses, failing to pay estimated taxes, or simply not knowing how much you should set aside for each quarter can put you in a precarious position. However, there are plenty of ways acquire tax debt relief and get back on track financially.

 In this article, we will discuss freelancing taxes and some solutions for getting out of debt and staying that way!

Understanding Freelancing Taxes 

Self-employment taxes are a bit more complicated. The IRS requires you to pay self-employment dues as an independent contractor if you’re a freelancer, and they’re different than the income tax payments you make. Self-employment taxes include social security and Medicare contributions, which can be a big chunk of your income if you have a full-time job.

If you’re not sure whether or not your job is considered self-employment, there are several factors that will help determine this:

  • How much control do I have over my work environment?
  • Do I have to pay for equipment or materials out of pocket?
  • Can I hire other people to perform tasks for me on occasion?

As a freelancer, there are two essential tax obligations that you should be aware of. There is your ordinary income tax first. Whether you are the operator or an employee, you must pay this. Since regular tax brackets are applied to both freelance and wage-earned income, the proportion you pay depends on how much money you make.

You additionally have to pay self-employment tax. This 15.3% levy is intended to pay for your social security and Medicare levies. Being taxed twice may seem unjust, but as a freelancer, you choose to be both an employee and an employer, so you must pay taxes that reflect that choice.

How much should I budget for self-employment taxes?

The short answer is: it depends!

The amount you set aside for freelance taxes depends on a few things:

  1. The amount of money you make as a freelancer
  2. How much you spend on expenses and other business-related costs
  3. What kind of deductions you’re able to take

The more money you gain, the more likely the IRS will want to see how much of your income was spent on business expenses rather than personal ones. If you don’t have many expenses—or if your deductions are minimal compared to your income—it may not be worth setting aside any money at all for taxes. On the other hand, if you do have significant business expenses and/or large deductions, it’s worth considering setting aside up to 30% of your income for taxes (the standard deduction).

If you’re still unsure what number is right for you, talk with an accountant or tax professional about your options and see what they recommend.

Tax Debt Relief Options for Freelancers

If you’re a struggling freelancer with large amounts of back taxes owed to Uncle Sam, several options available could help relieve some stress off those shoulders!

It’s important to note here that, once again, many other options are available from which people often choose before deciding on this particular route.

  • Offer In Compromise

You might wonder what an Offer in Compromise (OIC) is and how it works.

The IRS offers an OIC to settle your tax debt for less than you owe, but you must meet specific requirements to qualify. An OIC may be right for you if:

  • You can’t pay the total amount due on your taxes immediately
  • You expect your finances will improve within three years of filing the request
  • You have enough income each month, including any unemployment benefits or Social Security payments (if these are available), to cover basic living expenses such as food and housing costs
  • Installment Agreement

You may be eligible to apply for an installment agreement if you owe the IRS money. An installment agreement is a payment schedule that allows you to pay off your debt with monthly disbursements over a set period of time. While it’s important to make these monthly payments on time, sometimes life happens, and it becomes difficult or impossible to do so. If this happens, don’t despair! There are methods to get back on track without causing more problems with the IRS.

  • Penalty Abatement

If you face a large tax bill, it might be tempting to give up and let the IRS handle your debt. But before you do that, consider applying for penalty abatement. This program allows you to request a waiver of penalties and interest on your tax debt.

Penalties and interest are charged on your tax bill when you file late. Penalties can add up quickly: if you’re assessed an underpayment penalty in addition to standard interest charges and failure-to-file fees, the total could be more than $1,000—and that’s before considering any other penalties or fines associated with nonpayment.

If this sounds like too much money for one person (or freelancer) to pony up on their own, don’t despair; there is hope!

Ø  Settlement Options through the IRS Fresh Start Program

The IRS Fresh Start program is a way for you to settle your tax debt without going through the court system. You can use this program if you’ve tried to pay off your debt, but it’s not gone away.

One of the benefits of the IRS Fresh Start program is that it allows for monthly payments over an extended period of time. These payments are based on income and family size, so they may be smaller than what you owe at first glance.

Another benefit of taking this payment approach is that there are no penalties or fees added to what you owe. This means that after making all your payments towards settling your debt with the IRS, they’ll write off any remaining balance owed!

Consult with Tax Experts in Handling Your Debts

Take the opportunity to avail the free consultations that most tax debt relief agencies offer. Paperwork for freelancers is undoubtedly the trickiest procedure in the IRS dictionary.

Licensed tax professionals know how to navigate the confusing world of freelance taxes. They ensure everything is done right so that they can save you time and money in the long run.

Consult with tax experts for freelancing tax if you have any questions about which expenses can be deducted or what forms should be filed.

You shouldn’t wait to get help. You could be in debt for a long time if you don’t take action now!

Ignoring the problem won’t make it go away, and putting off dealing with your debt will only make it harder later. The best thing to do is find an expert who can help you solve your problem and move forward into the future with a clean slate.

Schedule a free consultation with us to learn more about the perfect tax debt settlement for you!

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