Taxes vary by countries, regions, and states; what you pay in the US might not be what you pay in the UK. As a freelancer, there is undoubtedly a tax obligation on the ground, but how you pay it is different from how a full-time employee handles it. It would be best if you know the tax rate for the region you are and pay accordingly. Paying taxes involves diligence, it is an obligation, and so, you might need help or probably a reminder to keep you in check.
If you are an employee in a firm, both you and the firm pay the Florida self-employment tax, which is the Medicare and Social Security taxes on your wages. These amounts reflect on your W-2 forms and are deducted from your paycheck or salary. As a freelancer, after your income tax, you still have the self-employment tax to battle with yourself.
An employer considers you as a freelancer or independent contractor by issuing you a Florida self-employment tax form. Freelancers fill the form 1099-Misc instead of a W-2 for full-time staff. Hence, freelancers receive their full payment for projects without tax deduction since they are responsible for their taxes.
The answers to the following questions will determine if you have self-employment tax obligations or not.
A “yes” to the above questions shows that you are a freelancer or independent consultant; hence, you have Florida self employment tax obligation. What freelancing borders on is the way you perform your job and how much control you have over it. If flexibility is so high, then it is most likely that you are considered as an independent contractor in that firm.
If you plan to file your Florida self employment tax yourself, there is a need to be diligent at keeping your income and expenses. This is especially important if you are paid in cash. As a freelancer, keeping track of all payments received for work is essential. You might need a notebook to help you to be effective in that. Anytime you are paid, write down the following:
If the cash is always deposited into your bank account, make sure you keep all your bank statements and electronic receipts. This will help you file for your Florida self employment tax accurately. You also need to save your receipts for supplies or items used to complete the work. Some of these items can later be deducted from your taxable income when you file for them. Good record keeping will help you escape being exploited by employers and even save you from the IRS audit.