How to file taxes as a freelancer: a first-year guide

Are you self-employed for tax purposes?

If you are paid for work as an independent contractor rather than as an employee, the IRS treats you as self-employed. That applies whether freelancing is your main job or a side business next to a salary, and whether or not you have formed an LLC. A single-member LLC taxed under the default rules changes nothing on the federal return: its profit still goes on your Schedule C. See whether freelancers need an LLC.

What to set up at the start

1. Open a separate account

   Put all freelance income into one account and pay business costs from it. Your bank statements then become your income and expense records.

2. Give clients a Form W-9

   US clients will ask for one before paying you. It gives them your name and taxpayer number, which can be an EIN rather than your Social Security number. See what an EIN is.

3. Choose a way to record income and expenses

   Accounting software or a simple spreadsheet, updated at least monthly.

4. Put the quarterly due dates in your calendar

   April 15, June 15, September 15 and January 15. Payments are worked out on Form 1040-ES.

What income do you report?

All of it. Freelance income is taxable whether you were paid by bank transfer, card, cash, a payment app or a platform, and whether or not you received a tax form for it.

The forms you may receive are only reports of what was paid:

Freelancers paid through marketplaces should also see Upwork and Fiverr taxes.

Keep your own record of every payment and reconcile it with any forms you receive. See reporting income without a 1099. If a form shows more than you actually received, for example because it includes refunds or personal transfers, report the correct figure and keep the evidence.

What can you deduct?

Ordinary and necessary costs of your freelance work, such as software, equipment, a home office used regularly and exclusively for work, business travel, professional fees and a share of your phone and internet. Business meals are generally 50% deductible. See deductible business expenses for the full list and the 2026 limits.

Which taxes will you owe?

• Income tax on your total income, including freelance profit, at the normal rates.
• Self-employment tax, which covers Social Security and Medicare, on your freelance profit. See self-employment tax explained.
• State income tax, in most states.

Two deductions help. You deduct half of your self-employment tax, and many freelancers can also claim the qualified business income deduction, generally up to 20% of qualified business profit, which Congress made permanent in 2025.

How do quarterly payments work?

If you expect to owe $1,000 or more for the year after withholding, you generally need to pay estimated tax in four instalments. In the first year, the simplest safe approach is to set aside a fixed share of every payment you receive and pay from that pot each quarter. Paying at least 100% of last year's total tax, or 110% if last year's income was over $150,000, avoids the underpayment penalty. See estimated quarterly taxes.

If you also have a salaried job, you can raise the tax withheld from your pay instead, which counts as paid evenly through the year. See side hustle taxes with a W-2 job.

How do you file the return?

1. Close the year's books

   Total income and expenses by category from your records. See also your first business tax return.

2. Complete Schedule C

   Business income, expenses and net profit.

3. Complete Schedule SE

   Self-employment tax on that profit.

4. Complete Form 1040

   With the deduction for half of self-employment tax, any qualified business income deduction, and your estimated payments.

5. File by April 15

   An extension on Form 4868 moves the filing deadline to October 15, but tax still has to be paid by April 15 to avoid late payment penalties and interest.

What records should you keep?

Invoices, bank and platform statements, receipts, a mileage log if you drive for work, and copies of any 1099s. The IRS can generally examine a return for three years after it is filed, so keep records at least that long. See how long to keep business records.

First-year mistakes to avoid

• Leaving out income because no 1099 arrived.
• Skipping quarterly payments and facing a large bill plus a penalty in April.
• Mixing personal and business spending in one account.
• Forgetting self-employment tax when estimating what you will owe.

Are there guides for specific kinds of work?

Yes: rideshare and delivery drivers, content creators, online coaches and course creators, real estate agents, truck owner-operators and Airbnb and short-term rental hosts.

This guide is general information. It is not tax or legal advice for your situation.