6 Documents Every Freelancer Needs to File Their Taxes
Introduction
There are more than 50 million freelancers working in America today in just about every field imaginable, according to Upwork and Freelancers Union. If you’re earning taxable income as a freelancer, it doesn’t matter to the IRS if you’re a writer, artist, website designer, tutor, or something else. You still have to do your taxes. According to the IRS, every self-employed person who earns $400 or more must file an income tax return. But filing your taxes can get complicated when you work for yourself. It helps to have the right paperwork. Here are six documents freelancers need to file their taxes.
1. Form 1099-MISC
Form 1099-MISC, more commonly known as a 1099, is the most important tax document for most freelancers. Any client who pays you $600 or more in a calendar year must send you a 1099 declaring your income by Jan. 31.
Key Points
- Tally Income: Quickly tally your annual income for tax returns.
- Report All Income: Remember to report income received from clients that paid you less than $600 as the IRS deems this taxable income.
Tip: Save your 1099 forms for future reference in case the IRS calls.
Image Description: Infographic showing a sample Form 1099-MISC.
2. Financial Statements
It’s important to keep track of your freelancing income and expenses so you know how much money you made (or lost) freelancing. If you use bookkeeping software to track your financials, doing taxes should be straightforward. Otherwise, you’ll need to use your financial statements such as credit card bills or bank statements to tally up your business expenses.
Common Business Expenses
- Domain and website hosting costs
- Office supplies
- Advertising costs
- Business meals
- Software and app subscriptions
Image Description: Illustration showing common financial statements needed for tax filing.
3. Receipts for Business Expenses
Receipts detail the date and time of the transaction, the vendor, the item, and the cost. Freelancers should save receipts in case of an audit or if the IRS needs to verify an expense. Receipt tracking apps can make this process easier.
Tip
Keep digital copies of all receipts for easier access and organization.
Image Description: Infographic showing the importance of keeping receipts for business expenses.
4. Home Office Documentation
If you perform your freelance work at home, you may be able to deduct a portion of your living expenses including your mortgage or rent payments. To qualify for this deduction, you must regularly use a portion of your home exclusively for doing business.
Deductible Expenses
- A percentage of your rent or mortgage payments.
- Home expenses related to your home office including utilities such as phone and internet, homeowners insurance, and improvements to your workspace.
Tip: Track home expenses that benefit your freelance work.
Image Description: Illustration showing the types of home office expenses that can be deducted.
5. Mileage Log
If you use your car for your business — for instance, to get to clients’ homes or offices — you can deduct car expenses and even mileage. Keep track of your vehicle costs and business mileage throughout the year. These costs must be separate from personal use of your vehicle.
Tip
Check out the IRS table of mileage rates for help calculating your mileage deduction.
Image Description: Infographic showing how to keep a mileage log for tax deductions.
6. Form 1040-ES
Form 1040-ES is used to calculate and pay your estimated taxes throughout the year on a quarterly basis. This will help you keep up with your income taxes, reduce the tax liability you have at tax time, and avoid penalties. It’s a good idea for freelancers to pay their estimated taxes throughout the year.
Tip: Setting reminders for quarterly tax payments can help you stay on track.
Image Description: Illustration showing a sample Form 1040-ES.
