1) You have to file freelance income if you’ve made over $400 in net income (paycheck minus expenses).
2) The deadline to file this year is April 18, 2017. If you’re reading this from the future, check the IRS website for the exact deadline. You can file a six-month extension so that your taxes are due in October, but that doesn’t mean you don’t have to pay your taxes on time. You can either estimate what you owe and pay it ahead of the April deadline, or you can wait and face interest and possible late-payment penalties.
3) You might have to file taxes multiple times a year. Freelancers who expect to owe at least $1,000 in taxes when their return is filed have to pay something called “quarterlies,” or “quarterly estimated taxes.” This involves online payment or mailing a form (called a 1040-ES) with a check to the IRS every few months to pay taxes in installments ahead of time. It’s a guessed amount, so if you end up overpaying, you’ll receive a refund later, like you would with a salaried job. If you exceed that $1,000 in taxes owed and don’t pay quarterlies, you’ll have to fork up a penalty and interest.
4) If you’ve made over $600 from a single media organization, they will likely send you a piece of paper called a 1099 to include in your taxes. Cross-check the 1099 with your own records, and know that you still have to record what you’ve been paid, even when you don’t receive a 1099.
5) There are a number of ways you can file taxes. You can do it all yourself using an online service or hire a professional. The IRS website helps match you with free filing options, depending on your income and other parameters. And some online services, including TurboTax and TaxAct, also offer free federal filing for higher incomes if the returns are simple (1040EZ and some 1040A returns). State government websites often offer info on free filing options, as well.
6) You should keep a record of income and money spent for business purposes. Think of yourself as a business: keep track of receipts, invoices, bank statements and paychecks.
“A common error is not keeping track of records and [saying], ‘I’m not a business person. I’m a writer,’” said Susan Lee, a certified financial planner in New York with a specialty in freelance taxes. “If you want to keep being a journalist, you’re going to have to get this part in order. If you don’t, you’re going to have a difficult life always worrying about the IRS.”
For business expenses, have a log that details the expense, how much, the date and time, as well as the purpose of the expense. Be specific – you used your monthly subway pass or took that $4.75 Uber to meet up with a robotics engineer for an interview at Starbucks, for example. This will help you calculate deductible expenses as well as defend them during an audit. A simple Google Spreadsheet will do the trick.
7) You can help yourself by keeping track of deductible expenses. Transportation, professional organization memberships and equipment are common examples (check out this list). For things like monthly train passes or phone bills, things get a little tricky – you have to estimate what percentage of that total expense is actually devoted to business. This is why keeping a log is important.
8) Business meals, home office rent and transportation are tricky deductibles. Eligible meals involve paying for another person and actually discussing business – casually talking about work with a friend doesn’t count. For transportation, commuting isn’t deductible, either; an Uber from an interview back to your home office doesn’t count, unless you then continue to work once you get home. Either way, be sure to justify any individual trips or meal expenses.
The same goes for a home office, which isn’t deductible unless there’s a “dedicated space” exclusively used for business. That could mean an entire room or, say, a 30-square-foot desk inside of a 700-square-foot apartment.
“If your roommate uses that desk, you can’t list it. It’s got to be exclusively used [for your freelance],” Lee said. “Many young people don’t have home offices. They sit on the couch with their laptop on their knees and they work, and then they watch Netflix from that same couch. There’s no way that it qualifies.”
9) U.S. citizens who make money abroad also have to file, whether that money came from a U.S. publication or not. If you’re a U.S. journalist who lives abroad, you might be eligible for “totalization” – a policy that basically means you won’t have to pay American social security, so long as you’re paying an equivalent to another foreign government.
10) Opening a tax account will save you later on. Since your freelance paychecks come in untaxed, Lee recommends contributing 25 to 30 percent of each check to a special account where this money sits until you have to pay up. This way, you don’t end up owing more money to the state or federal government than you can afford.
If that does happen, figure out how much you can reasonably pay back to the state and federal government each month.
“Never commit to more than what you can pay. The real problem is not owing at the end – it’s not earning enough to pay off the taxes,” Lee said.
This article is part of GroundTruth’s Navigator newsletter, which sends a list of journalism opportunities and advice from reporters twice a month.