Freelancers Top 10 Tax FAQs (Answered!)

Freelancing comes with a lot of freedom: work from anywhere, wear what you want (or don’t), and finally say goodbye to micromanaging bosses. But when tax season shows up? Ugh. Suddenly it’s less “laptop lifestyle” and more “what the heck is a Schedule C?”

Deep breath. You don’t need to become a tax expert, you just need the essentials. So let’s break down the top 10 tax questions freelancers ask (without the accountant-speak).

You focus on your passion, we’ll help you figure out the rest.

1. Do Freelancers Really Have to Pay Taxes?

Short answer: yep. If you earned $400 or more from freelance work in the U.S., the IRS considers you self-employed, which means you're on the hook for self-employment and income tax.

Why it matters:

• Self-employment tax = Social Security + Medicare (around 15.3%)

• State taxes may apply depending on where you live

• No 1099? Still counts. Report all income (even from Venmo or Zelle gigs).

Pro Tip: Clients aren’t required to send you a 1099 unless they pay $600+, but you still need to report every dollar.

2. What’s the Deal with Quarterly Taxes?

You don’t get taxes taken out of your freelance income, so the IRS wants its cut throughout the year, not just in April.

Pay estimated quarterly taxes if you expect to owe $1,000+ for the year.
Key deadlines:

• April 15

• June 15

• September 15

• January 15 (of the following year)

Pro Tip: IRS Form 1040-ES is your friend. Or plug into tools like Cashflowy to calculate and pay without the spreadsheet drama.

3. Can I Deduct Business Expenses?

Heck yes. If you spent money to run your business, it might be deductible.

Common write-offs:

• Home office

• Business software & subscriptions

• Website + marketing costs

• Travel + meals with clients

• Phone/internet (portion used for business) 

Heads up: Only deduct the percentage used for business. If your phone is 50% biz, deduct 50% of the bill.

4. Who Qualifies for the Home Office Deduction?

If you use part of your home exclusively and regularly for business, you may qualify.

Two options:

• Simplified: $5 per sq. ft. (max 300 sq. ft.)

• Regular: Deduct based on actual expenses (utilities, rent, etc.)

Pro Tip: Your couch doesn’t count. Neither does your bed. You need a clearly designated workspace.

5. Do I Need a Business License to File Taxes?

Not always. The IRS doesn’t require it, but your city or state might.

Check with your local government (usually the Dept. of Revenue or Business Licensing office) to see if you need to register, even if you're solo and working from home.

6. What Tax Forms Do Freelancers Use?

Here’s your mini cheat sheet:

• Schedule C (Form 1040): Reports freelance income/expenses

• Schedule SE: Calculates self-employment tax

• 1099-NEC: Sent by clients if they paid you $600+

• Form 1040-ES: For those estimated tax payments

No 1099? No excuse. Still report the income.

7. Can I Deduct Health Insurance?

Yes! If you're self-employed and not covered by a spouse or employer, you can deduct 100% of your premiums.

Covers:

• Medical

• Dental

• Vision

• Long-term care

Goes on your Form 1040, lowering your taxable income directly.

8. Can Freelancers Save for Retirement (and Get a Tax Break)?

Absolutely. Freelancers can and should save for retirement, and the IRS rewards you for it.

Options:

• SEP IRA: Up to 25% of net income (max $69,000 in 2024)

• Solo 401(k): High contribution limits, especially if you’re the “employee” and “employer”

• Traditional IRA: Up to $7,000 in 2024 if you're under 50

Most are tax-deductible = lower taxable income now, more freedom later.

9. How Do I Track Income & Expenses?

Organize early. Thank yourself later.

Best practices:

• Use apps like Cashflowy

• Save receipts + client invoices

• Keep biz income in a separate account

• Categorize monthly, not “when you have time”

IRS rule: Keep records for at least 3 years (7 if things get complicated).

10. What Happens If I Skip Estimated Taxes?

Oof, penalties and interest.

If you underpay by more than 10% or owe over $1,000 at tax time, the IRS may ding you. The longer you wait? The more you pay.

Avoid it with the IRS Safe Harbor Rule:

• Pay 100% of last year’s tax liability

• Or 110% if you made $150k+

• Or 90% of this year’s projected tax

Freelancers’ Tax FAQ Recap:

Extra FAQs (Because You’re Not the Only One Wondering)

Q: I didn’t get a 1099, do I still report that income?
A: 100%. If you earned it, you report it.

Q: Can I deduct my new laptop?
A: If it’s for business use, yes. Just deduct the portion used for work.

Q: What if freelancing is just my side hustle?
A: You’re still self-employed, which means yes, tax rules still apply.

Wrapping It Up

Freelance taxes don’t have to feel like a second job. When you understand the basics, stay organized, and prep ahead, you’ll save money and stress.

But hey, if you’re still feeling “uhhh…” when it comes to taxes, we get it. That’s why Cashflowy makes it easy to track income, categorize expenses, and get tax-ready reports on autopilot.

No more tax panic

No more spreadsheet fog.
Cashflowy automagically handles your bookkeeping, predicts your tax bill, shows you exactly how much you can pay yourself, tracks your cash in real time, and your AI Financial Coach, Clara, gives you your next Money Move to grow profit.