Freelance writing no doubt is flexible in terms of schedule, work preference, number of hours, the place to work and even payment rate. While all these are fantastic advantages to a freelance writer, there are other issues that pose challenges to even the savviest of freelancers. There’s a hustle that comes with freelancing, having known that you do not have a guaranteed paycheck is part of the freelance writer challenge as well as tax issues.
Once you’ve started earning from writing, you must begin to report your income to the IRS. But how do you go about this report if you know next to nothing about freelance writer taxes? It becomes even more difficult because the tax situation for people is unique based on different factors like investment, ownership, and marriage.
The freelance writer's income pattern is unique and many times, cobbled together. Filing taxes for freelance writers is a bit complex factoring in their self-employment status and retirement plans. Below are what you should know if you fall in the above category:
You are not in the business of writing of you occasionally earn from it through creative writing. IRS put creative writing into the hobby classification. Writers that market their work solely for profit are the ones that benefit from business deductions during tax filing. Tracking of income and expenses follows the same format, whether you are reporting business or hobby income.
Instead of reporting with the less restrictive Schedule C, hobby income is reported on a 1040 tax return form, which has a limitation on expense deductions. Don’t expect the regular W-2 as a freelance writer since the form states the wages paid by an employer. Freelance writers that work for independent business may report income earned on the form 1099. However, you may not get this form from every employer, and a company would only send you the document if they’ve paid you at least $600 during the tax year.
It is crucial to track and report revenues from every source whether you receive form 1099 or not. There’s a misconception that income isn’t taxable if a taxpayer does not receive form 1099 for it. That idea isn’t right; take account of your income from business and independent contractors throughout the year to accurately report and pay freelance writer taxes.
There are two ways to go about paying your tax as a freelance writer. If your tax is less than $1,000 annually, there’s no penalty if you choose to pay at once when the year ends. But to avoid a big bill, it is better to estimate and pay incrementally at the end of every quarter.
The following are essential tax deductions you should know. Keep a record of them and deduct from your income before paying freelance writer taxes.
A lot goes into income tracking, deduction, and tax filing when you freelance since it is a home-based business. You should work with a professional on tax matters if you are a new freelance writer. By doing so, you will help in easy tax filing, and you will not be underpaying or overpaying freelance your taxes as a freelance writer.