Advertiser Disclosure: At Slickdeals, we work hard to find the best deals. Some products in our articles are from partners who may provide us with compensation, but this doesn’t change our opinions. Working as a freelancer can give you the chance to do what you love and the flexibility to balance your work with the rest of your life. But come tax time, being a freelancer can be stressful. The tax process for independent contractors works differently than for W-2 employees, so it’s crucial that you take steps to understand what you need to do so you don’t get stuck with a huge tax bill you can’t afford. Here’s everything you need to know about paying taxes as a freelancer. Understand the Forms The most common tax form you’ll receive as a freelancer is the 1099-NEC form. NEC stands for nonemployee compensation. This form has replaced the 1099-MISC form, which was previously used to report payments clients make to independent contractors, among other things like rent and payments to an attorney. You’ll receive a 1099-NEC form from each client that paid you more than $600 during the tax year. Note, however, that even if you don’t earn enough to merit the form, you’ll still need to report that income on your tax return. The 1099-NEC form lists several pieces of information, including: The payer’s name, address and taxpayer identification number. Your name, address and taxpayer identification number. Your total nonemployee compensation for the year. How much federal and state tax was withheld, if any. Note that while some clients may choose to withhold taxes, it’s rare. In contrast, if you’re also an employee and receive a W-2 from your employer, you’ll see both federal and state taxes withheld. You’ll also need to file a Schedule C when you file your taxes. The Schedule C form aggregates your income and expenses to show your business’ net income, which is the number you’ll use to figure out how much you owe. Know How Often Freelancers Pay Taxes
