US Taxes for Freelancers & Independent Contractors Working Abroad

Both of them could write off the money they spent advertising their services. In all my years of filing taxes, never have I experienced a more personable, understanding, compassionate and professional group of people. This team is incredibly focused and has the experience that will top anyone, anywhere period.

Since you don’t have an employer to keep track of how much you work, it’s best to do it yourself and have a record of how many hours you spent on each project and client. So, here’s a quick rundown of the most important tax forms you need to know about. So, if you’ve received $600 or more from a single client during the year, they are obliged to file Form 1099-NEC to the IRS and provide you with a copy as well.

Getting help with independent contractor taxes

As a US person, you must file a US tax return reporting your worldwide income. However, your income source could impact who you owe your taxes to. If there is no tax treaty in place, you normally have the option to claim the foreign tax credit to reduce or eliminate any US tax owed on this income. Well, quarterly tax payments are due on a schedule set by the IRS.

It’s an obnoxious, tedious ordeal — so obnoxious and tedious, in fact, that more than a third of freelancers don’t even bother paying taxes, according to the same poll. If you are an independent contractor, the IRS considers you to be self-employed — you aren’t an employee https://www.bookstime.com/articles/enrolled-agent-exam of any company. As an independent contractor, you can operate as a sole proprietor, a limited liability company (LLC) or an S-corporation. The majority of businesses in the U.S. are run as sole proprietorships, so we’ll focus on that structure in this article.

Reporting self-employment income

However, most freelancers are going to have complicated-enough tax situations to warrant a paid software solution with premium features and built-in support from seasoned tax professionals. Budget for around $105 for your federal return and about $50 for every state return. If your state has income tax, you’ll also be required to file and pay your state income taxes. Check with your state to understand when and how to pay state taxes on your income as an independent contractor. Remember that an independent contractor is considered to be self-employed, so in effect, you are running your own one-person business.

H&R Block offers a variety of plans suitable for first-time tax filers with uncomplicated needs as well as small business owners who want to maximize deductions for their small business. You can use H&R Block’s Self-Employed Online to claim basic small business expenses and to report all business deductions and asset depreciation. LYFE Accounting has extensive experience in servicing independent contractors.

Home Office

We know every form you need and every deduction you can take to pay less this year. Keep in mind, personal, living or family expenses are never allowable as deductible business expenses. He must have certain licenses and training in order to serve his clients. He could deduct those education classes and professional licensing fees. The “independent contractor vs employee” conversation is simple when looked at through a tax perspective. In short, contractors are paid via 1099-NEC with no taxes withholds while employees are paid via W-2 with taxes withheld.

• If you don’t feel like tracking activities in real-time, you can input them manually using Clockify’s timesheet view.
• That makes it easy to see the value of write-offs when you’re working as an independent contractor.
• Or, when done editing or signing, create a free DocuClix account – click the green Sign Up button – and store your PDF files securely.
• Look for one that’s simple, affordable, and offers great customer service so you can get all the deductions you’re eligible for this year.

According to the Bureau of Labor Statistics, self-employment rates are on the decline, but this conclusion might be due to improper or inaccurate reporting on behalf of contractors and other self-employed individuals. Totalization agreements are similar to tax accountant for independent contractors treaties—but applied to Social Security taxes. As a self-employed expat, a totalization agreement would protect you from having to pay the self-employment tax to multiple countries. The US currently has totalization agreements in place with 30 countries.

Do I need receipts for 1099 write-offs?

If you want to work and file your taxes with a tax pro, prices start at $220 to meet with them virtually or in person at one of the 12,000 locations worldwide. Each tax pro has an average of 12 years of experience and offers year-round tax support. After we’re done with the steps above, it’s time to double check the figures. To ensure accuracy on your financial statements and ultimately your tax return, we will reconcile your accounts. Each of them offers different services and specializes in a different area. We recognize this, which is why your independent contractor accounting services will be customized to fit your specific needs and goals.

While TaxSlayer Self-Employed handles most self-employed returns with ease, it can be more challenging to file when your situation is more complex. For example, a self-employed person who purchases a building and wants to claim depreciation will need to be familiar with tax terms to complete their tax filing. TaxSlayer is less expensive than similar self-employed options offered by TurboTax and H&R Block, which can charge in the neighborhood of $150 or more for filing your federal and state taxes. TaxSlayer SE charges just under $100 for your federal return and one state tax return.

If you have a reasonable basis for not treating a worker as an employee, then you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Publication 1976, Section 530 Employment Tax Relief RequirementsPDF, for more information. TurboTax offers a robust option for those who are preparing taxes for their small business for the first time. TurboTax is one of the big players in the industry, completing 38 million tax returns last year.

If you’re looking for a retirement plan option, consider a SIMPLE IRA, SEP IRA or a solo 401(k). These plans allow for deductible contributions, with qualified withdrawals taxed at your ordinary income tax rate in retirement. And while Cash App Taxes allows self-employed people to file their tax returns completely free, it lacks in customer service. We weighted customer service heavily in our analysis as self-employed taxes can be complex and unintuitive. While you’ll spend around $100 to file your self-employed taxes with TaxSlayer, you get a lot of value for the cost, including a priority phone line. Low-cost competitor Cash App Taxes offers only email or chat support.