If you aren’t sure how much you should send the Internal Revenue Service, my advice is to work with a good accountant to help you figure it out. My accountant prints out slips for me to send in my estimated taxes, which he determines for me based on the previous year’s earnings. He also gives me addressed envelopes, making it super easy to pay what I owe. (If only he provided the money to pay what I owe…)
Keep in mind, if you file married jointly with your spouse, this could affect the amount of money you owe. Some freelance writers on the WriterAccess platform have altered their spouse’s withholdings to make up for what they are not paying in estimated taxes, which helps them come out even by the end of the year.
If you aren’t a tax pro and you’re not sure how to estimate payments, hiring india cell phone number list a good accountant can be well worth the investment, at least until you get the hang of it yourself. If you want to try your hand at it, the IRS’s site provides forms that allow you to enter your previous year’s income information to determine your new year’s estimated tax amount.
What is Self-Employment Tax?
According to the tax professional mentioned above, Bruckner, any gig worker who makes more than $400 a year owes the government self-employment tax. This goes above and beyond income tax. It means you pay the Medicare and Social Security withholdings that would have been withheld by your employer if you were traditionally employed. It is this self-employment tax that usually causes issues for gig workers, not their income tax.
The Future of Freelancer Taxes & What to do Now
Hopefully, with more people embracing gig work, tax laws will change to make the process of paying estimated and self-employment taxes easier. In the meantime, Buckner recommends all gig workers keep exhaustive records of both your income and any applicable expenses. (Remember expenses can include anything that is vital to your job, even the cost of internet.) She also recommends visiting the IRS site to determine what you might owe and how to pay estimated taxes, ensuring you are in good standing come April 15th.