Hey Freelancers, Here’s The Main Form You Need To Know When Filing Taxes
More than 40 percent of millennials had a side gig or did freelance work in 2018. If that includes you, then go you! Side-gigging, though, is quite different from a regular full-time job, and that’s especially true when it comes to your taxes. You may or may not know that you must file your taxes differently if your income varies month to month. Do you know what form to use? If not, then say hello to the good ol’ 1099-MISC form.
What is a 1099-MISC form?
The 1099-MISC form is given to those who are considered freelancers, independent contractors or self-employed by their clients. You need one for each client you worked for that paid you more than $600. If they don’t send you one, you’ll need to report your own earnings, if you made more than $400 throughout the year. The client should fill out the form first and send it to you, and you’ll use this form when you file your taxes.
Why is it necessary?
So, why do you need this separate form when you can account for each amount of income on your regular tax documents? It’s for the protection of the clients you worked for. Clients need to account for every dollar they pay, especially if it’s to someone not on the regular payroll so that the reported income on their tax returns is accurate.
Anything else that I need to know?
If you freelanced for multiple clients in the past year, you should receive 1099-MISC forms from each client and you must report each form on your tax return instead of adding it all into a lump sum. It’s important to understand how to report all of your income, especially when you weren’t paid a standard paycheck.
If you do a lot of freelancing and are really bringing home the bacon, it’s smart to pay your taxes quarterly rather than just at income tax time. If you don’t, then you’ll want to save 25 to 30 percent of that income to pay your taxes come April.
Whatever you do, make sure you pay your taxes for your freelance income on time, every time. You don’t want to miss the deadline and incur extra fees and penalties. After all, your side hustle is supposed to help you save, not spend more. And even though freelancing can be extremely confusing when tax season rolls around, don’t get too caught up. The process is simple once you’re familiar with the form. Good luck, side gig peeps!