The IRS doesn't make it easy for 1099 independent contractors like you, does it? You're not an employee of the company you work for, so there's no W-2 to file. Nope - instead you get a 1099. Whether you work on Fiverr as a writer, marketer or freelance consultant, you'll need to file your independent contractor taxes. So how do you file your Fiverr 1099 taxes? Well, luckily there are ways to simplify the process. Let me show you how...
Note: If you want an easy way to handle all of the taxes for your Fiverr gigs, then try Bonsai Tax. Our tax software will help you organize all of your business deductions, remind you of filing deadlines, and estimate taxes. Users typically save $5,600 from using our app. Get your 7-day free trial here.
Taxes You'll Pay For As A Fiverr Freelancer
Remember, as a self-employed freelancer, you are solely responsible for reporting all of your income and paying all of the taxes you'll owe. Since Fiverr doesn't withhold any money from your earnings or what you are paid, you'll report and pay taxes on all of the income you make. Let's quickly review all of the taxes you will be responsible for.
Federal & State Income Tax
Regardless of if you are an independent contractor or not, everybody has to pay income taxes. The main difference between State and Federal income taxes are:
federal income taxes are taken by the government to pay their bills (10% to 37%)
State taxes are collected from your specific State to pay for the State government bills (0%-13.3%)
Depending on what State you live in, will determine how much taxes you'll need to pay.
Social Security & Medicare Taxes
Social Security and Medicare or self-employment taxes turn out to be 15.3%. You'll pay 12.4% for Social Security to cover things like old-age, survivors, and disability insurance, and 2.9% for Medicare.
Note: Quickly estimate your taxes with Bonsai's free 1099 tax calculator. Use our tool to quickly discover how much taxes you'll owe to Uncle Sam at the end of the year.
Federal law sets a maximum amount of net income that are subject to the Social Security tax. For example, in 2021, the highest amount of earnings you'll pay taxes on is $142,800. So, if you earned $160,000, you won't pay Social Security taxes on $17,200.
As a rule, you won't need to worry about self-employment taxes if you were paid less than $400. You'll still need to pay income tax and Social Security and Medicare although you don't meet the $600 threshold to receive a 1099. The IRS will catch a lost 1099, so our advice is always to file.
For example, if you complete a one-off job and receive a $500 payment from it. You will not receive an IRS 1099 tax form for the completed freelance job, but you'll still need to fill out a tax return on that money since it is past the $400 threshold. So, the IRS will expect you to report that income.
Now that we talked about all the taxes you'll be liable for, let's go over all the different 1099s you'll receive as a Fiverr freelancer.
1099s You'll Receive As A Fiverr Contractor
There are two forms you'll generally have to deal with as a Fiverr independent contractor. Businesses are required to send out these forms by January 31. We'll review the two forms. 1099-NEC and 1099-K, and their requirements here.
The most common 1099 form freelancers receive would be the 1099-NEC. The requirement to receive this 1099 form is if you earned more than $600 in payments from a business for your gigs. This form took over the reporting for non-employee compensation from the 1099-MISC in 2020. So, you'll receive the 1099-NEC instead. Businesses are only required to issue a 1099 if they paid a payee more than $600. So you may not receive a 1099 if you earned less than $600 but you may still be required to pay taxes.
The other form you'll receive as a Fiverr freelancer is the 1099-K. The form 1099-K is distributed if you received your payments from third-party payment processors like PayPal or if you make over $20,000 and have 200+ transactions. Depending on what State you are in, the requirements may vary.
If you live in Maryland, Virginia, Vermont, or Massachusetts then you'll receive a 1099-K if you earned more than $600 in payments from PayPal, regardless of how many transactions you made. In Illinois, you'll receive this form if you made at least 3 transactions and they totaled over $1,000.
What If You Don't Receive A Tax Form?
If you didn't receive a 1099 in the mail, double-check if you met the requirements.
You can log into your Fiverr account and verify your reported payments. If you know that you met the requirements to receive a 1099, but you did not get a tax form, contact PayPal or Fiverr immediately to let them know. You can quickly check by going to the "earnings" tab on your Fiverr dashboard.
Another reason why you may not have received a form is if you put the wrong address on your account. So be sure to verify that all the information on your account is correct.
The Low-Down On Quarterly Estimated Taxes
Most employees don't have to worry or care about withholding and the underpayment of income taxes. The employer practically will handle all of that. As a freelance contractor with 1099 income, you need to listen closely. If you'll owe more than $1,000 in taxes at the end of the year, the IRS requires you to pay quarterly taxes. Quarterly taxes are four estimated payments made to the IRS to cover your taxable income. This was designed to prevent freelancers from being overwhelmed by a large tax bill at the end of the year. Instead, you'll pay taxes on your revenue throughout the year.
Due Dates For Quarterly Taxes
Paying quarterly taxes is fairly simple. You can send them via the IRS's website. Here are the due dates for you to send in estimated tax payments.
The first payment is due on April 15
January 15 of the following year
If you pay all of your estimated taxes in the previous year on time, you won't have any extra fees tacked onto your tax bill. However, if you miss the payment date or pay fewer taxes than you should pay, you'll owe a tax underpayment penalty. Unfortunately, you would not be able to claim deductions on quarterly taxes. You'll need to organize and claim your business expenses between January to April 15 when it is time to file taxes.
How do I pay estimated taxes for the first time?
If this is your first year as a Fiverr contractor, you can send the payments through these methods:
By automatic electronic withdrawal from your bank account using IRS Direct Pay.
By credit or debit card‚ see the IRS website.
Tax Deductions Available to Fiverr Freelancers
As a business owner, one of the luxuries you can take advantage of is business deductions to avoid paying taxes. Keeping track of your receipts for taxes is a surefire way to pay less money to Uncle Sam when you file your tax return.
Note: the quickest and simplest way to track expenses is to use an expense tracker like Bonsai Tax. Bonsai Tax organizes all your tax deductions for you by scanning your credit card/ bank statements so you can maximize your tax savings. In fact, users typically save $5,600 from using our app. Try a 7-day free trial here.
It's Time To File Your Taxes (Fiverr International LTD 2021)
The end of the year is a great time to take care of personal and business taxes. If you’re an independent contractor (1099) with Fiverr, then it's your responsibility to report all income and expenses on Schedule C as well as pay quarterly estimated taxes throughout the year. Our tax software for freelancers can help simplify this process for you by automatically calculating what you owe in federal and state taxes every quarter and provide reminders when they're due. You'll never have to worry about forgetting or paying too much again! Try Bonsai Tax today — we know how hard it can be as a small business owner juggling everything else going on in life! Claim your 7-day free trial here.
We always suggest you talk to an accountant or professional for any freelance contractor tax questions or advice.
As a small business owner, understanding the various IRS-required forms for subcontractors is absolutely essential to remain compliant. This guide will let you know all about creating 1099 forms and what types of forms you may need..