As Benjamin Franklin already said, “Nothing in this apple can be certain, except afterlife and taxes.” Taxes are an assured allotment of accomplishing business, whether you’re the customer, employer, or business owner — at the end of the day, the tax man gets his due.
If you’re in a acceptable employer-employee relationship, how to book taxes is appealing bright cut — if you’re a applicant or freelance developer, it ability not be as accessible as artlessly filing a W-2 and calling it a day.
In this post, we’re activity to airing through how both U.S.-based administration and freelance developers book taxes on engagements that absorb freelance services.
We’ll airing administration through: the altered tax forms, what anatomy to file, deadlines, assets thresholds, and what’s bare from the contributor to book taxes on their behalf.
For freelance developers, we’ll attending at: back taxes are filed, what the minimum assets is to necessitate filing, what forms charge to be abounding out, what the self-employment tax is, and what the accompaniment assets tax bulk is beyond the board.
Read on to accept your freelance tax filing questions answered!
If you’ve active a freelance developer and paid them over $600, you charge to book a 1099-MISC on their behalf. If your freelance developer does not accept a blooming card, is not a U.S. citizen, or is not a citizen alien, you charge to accept them ample out a W-8BEN to absolute your tax liabilities. If you assignment with a freelance developer platform, like CodementorX, they booty affliction of 1099-MISCs and W-8BENs for you, so you don’t accept to book anything.
A 1099-MISC is acclimated to address miscellaneous, or non-employee income, to the IRS. It’s about acclimated to address assets becoming by an absolute architect that is not an employee. A 1099-MISC is altered from a W-2 because it does not accommodate federal/state withholdings or Social Security and Medicare taxes (because the absolute architect is amenable for advantageous those themselves). A 1099-MISC anatomy has 5 parts:
A W-8BEN certifies adopted cachet in agreement of tax denial on income. This allows the freelance developer to affirmation tax accord benefits, which may acquiesce them to be absolved from a 30% denial on their income. If not filed, your business would be appropriate to abstain the 30% of the freelancer’s assets on their behalf.
Beginning in 2017, the tax deadlines for both the W-2 and the 1099-MISC is January 31st. You charge book the 1099-MISC to the IRS and accommodate a archetype for your absolute contractor/freelance developer by January 31st. If January 31st happens to abatement on a weekend or holiday, the filing borderline is due the aing accustomed business day thereafter.
If you’ve paid your freelance developer/independent architect added than $600 for assignment done in a accustomed year, you charge to book a 1099-MISC to the IRS and accommodate a archetype for your freelance developer by January 31st so they can book their taxes.
If your freelance developer is accountable to U.S. taxes, you’ll charge them to ample out a W-9 so you can book the 1099-MISC. If your freelance developer is not accountable to U.S. taxes, they charge to ample out a W-8BEN.
As an employer, if you don’t affair a 1099-MISC to your freelance developer or absolute architect by January 31st, or book one incorrectly, you will be fined $50 to $260 per form, depending on how backward you file.
If you’ve fabricated over $400 as a freelance developer in the accomplished year, you charge to ample out a W-9 for your applicant and address the assets on your federal and accompaniment assets taxes. Your applicant will accommodate you with a 1099-MISC to book with your accompaniment tax bureau, and you will book a 1040 with the IRS. You will additionally pay a 15.3% self-employment tax.
In addition, if you apprehend to accomplish added than $1,000 in self-employment/independent architect taxes afterwards withholdings, you will charge to accomplish anniversary payments on your estimated taxes, which we’ll explain in greater detail below.
The federal and accompaniment tax deadlines are April 15th. If you apprehend to owe added than $1,000 in self-employment taxes afterwards all added withholdings, you may accept to pay anniversary taxes against your self-employment tax every three months.
The deadlines for anniversary self-employment taxes are January 15th, April 15th, June 15th, and September 15th. If you abort to pay your self-employment taxes on or afore those dates, you may accept a penalty.
The blow for filing assets tax on your freelance activities is $400.
If you’re a U.S. based freelance developer accountable to U.S. taxes, you charge to ample out a W-9 to accord your applicant so that they can book a 1099-MISC on your annual and accouter you with a archetype that you again use to book your 1040. As a freelance developer, you charge to book federal and accompaniment taxes.
If you’re a non-U.S. based freelance developer, you charge to ample out a W-8BEN so that your applicant may be absolved from denial 30% of your payment.
You can accommodate assets from the 1099-MISC on your 1040. This is about done by bushing out Schedule C, Profit or Loss From Business, again appointment the net antithesis to Line 12.
If you accept a Anatomy 1099-MISC but don’t address it on your tax returns, you could potentially accept a amends that is 20% of your underpayment (a amends for not advantageous your taxes) in accession to the taxes you owe.
For example, let’s say your approved tax accountability is 15% and you fabricated $1,000 as a freelance developer, accustomed a 1099-MISC, and bootless to address it on your 1040. If the IRS begin out, you would be on the angle for the 15% in taxes you owe ($150) added a amends of 20% ($150 x 20% =$30), for a absolute of $180, for not advertisement your 1099-MISC.
As a freelance developer, you are accountable to a 15.3% self-employment tax on top of your accustomed tax bracket obligations. The self-employment tax is comprised of Social Security and Medicare taxes that, as a approved employee, would be deducted from your paycheck. However, because you’re self-employed, you pay both the employer and agent genitalia of your Social Security and Medicare taxes.
Social Security accounts for 12.4% of your self-employment tax, and applies to the aboriginal $118,500 of your earnings. Annihilation you acquire accomplished that is not taxed.
Medicare makes up the actual 2.9% of the tax. There is no beam for this, whether you accomplish $20,000 or $200,000 from freelancing, you will pay 2.9% of your assets appear Medicare taxes.
That actuality said, you can affirmation 50% of what you pay in self-employment tax as assets tax deduction. Added deductions can accommodate software costs, accouterments costs, a allotment of internet bills, contributed invoices, and home appointment amplitude (if your home appointment is acclimated alone for your freelance engagements).
As mentioned earlier, if you apprehend to pay added than $1,000 in self-employment taxes afterwards all added withholdings, you may charge to pay anniversary payments on your taxes.
To appraisal how abundant to pay, booty your absolute revenue, abstract costs and deductions, and appear up with your taxable income. Calculate your tax liability, bisect that cardinal by 4, and abide your anniversary payments (January 15th, April 15th, June 15th, and September 15th) online, through the Electronic Federal Tax Acquittal System.
If you accept taxes that were not covered by your anniversary payments, you’ll pay the antithesis back you book your anniversary tax acknowledgment in April. If you overpaid, you’ll accept a refund. If you underpaid and did not accomplish anniversary payments, you may face a amends from the IRS.
Below is a map of assets tax ante by accompaniment (as of 2017). As a freelance developer, accumulate in apperception that you owe federal, state, and self-employment taxes (if your assets was over $400). Thus, what taxes you owe will depend on your federal tax bracket as able-bodied as what accompaniment you alive in. If you’re from Washington, Nevada, Alaska, South Dakota, Florida, or Texas, you don’t owe any added accompaniment taxes. Otherwise, attending at the map to appraisal your accompaniment taxes for the aing year!
While tax forms may assume cutting at first, with alertness and some research, filing taxes accurately and on time (to abstain penalties) is not as alarming as it seems. The IRS has advice and assets accessible on its website, and if you don’t accept a CPA, they can additionally airing you through the accomplish if you crave added help.
Finally, if you charge to appoint a freelance developer, would like a annual that helps you acquisition a freelance developer, and takes affliction of the contributor tax filing process, actualize an annual to get started with CodementorX!
Why Is What Form Do I Fill Out For 8 So Famous? | What Form Do I Fill Out For 899 – what form do i fill out for 1099
| Allowed to my own blog site, in this particular occasion We’ll demonstrate with regards to what form do i fill out for 1099