How Freelancers Can Prepare for Tax Season Without Stress

Publication Date

April 17, 2023

Summary

Taxes can feel overwhelming, even when you aren’t a freelancer. But as a self-employed online service provider, the better you understand your taxes (and the sooner you prepare), the easier life gets when April rolls around.

5 Tax Basics Every Freelance Writer Should Know

1. How Much Should I Set Aside for Taxes?

Every single time you get paid — whether it’s $50 or $5,000 — set aside 20–30% of that income for taxes.

Why? Because as a freelancer, you’re responsible for self-employment taxes (around 15.3% total: 12.4% Social Security + 2.9% Medicare) and your state taxes, which vary but often average around 15%.

You may not end up needing that whole amount, but you will be glad you saved it when tax season hits.

2. Sole Proprietor vs. LLC: What’s the Difference for Freelancers?

Most freelancers can probably start out as Sole Proprietors – unless you’ve got dependents, are controlling a budget for your clients (like running paid ads), offering PR, or you have property you want to protect.

Sole Proprietor

A sole proprietorship is the default setup when you start freelancing — no extra paperwork required. You’re entitled to 100% of your profit but also responsible for 100% of the risk and debt.

⚡️ Tip: Get an EIN (Employer Identification Number) — basically a Social Security number for your business — for free from the IRS. It adds a layer of protection and keeps your SSN private.

LLC (Limited Liability Company)

An LLC is a simple legal structure that gives you limited liability — meaning your personal assets (car, house, savings) are better protected if your business is sued or can’t pay debts.

Cost: Filing fees range from $40–$500, depending on your state.

Tax Note: A Sole Proprietorship and an LLC are taxed the same way — unless you elect to become an S-Corp.

S-Corp status allows you to pay yourself a salary and potentially lower your self-employment taxes. But it also comes with more admin: separate accounts, payroll, bookkeeping. If you go this route, keep business and personal finances 100% separate and talk to a CPA.

3. Do I Need to Pay Quarterly Taxes?

First year? Probably not. But after that, probably yes.

If you owe $1,000 or more per quarter, the IRS expects you to pay quarterly estimated taxes.

If you skip them, you’ll owe a small penalty — usually under $100 per quarter — but if you habitually underpay, those fees might add up fast.

If you know you struggle to save for your taxes, you might also want to send $1,000/quarter straight to the IRS so you’re not tempted to spend it elsewhere.

4. What If I Can’t Pay My Taxes in Full?

Don’t panic — the IRS offers payment plans.

Short-term plan: Pay in 90–180 days — no interest.
Long-term plan: Pay monthly — but you’ll owe interest.

Payment plans don’t have strict monthly quotas or anything. You just need to pay the full amount by your due date.

Important: You should still file on time even if you can’t pay in full. You can pay any amount toward your total when you file.

5. Should I Get an EIN?

Short answer? Yes.

An EIN (Employer Identification Number) is free to get from the IRS and only takes a few minutes.

Benefits:

Keeps your Social Security number private
Required if you ever hire W-2 employees, form an LLC, or open a solo 401(k)
Helps protect against identity theft
Needed for some business bank accounts or funding

⚠️

Beware: Make sure you’re on the actual IRS website when you go to apply for your EIN. There are tons of EIN scams that are designed to steal your identity so be cautious!! You should not have to pay for your EIN!! If there’s a payment expected, you’re on the wrong site.

This is the correct link to the EIN application on the IRS’ website →

Try This:

Taxes are due April 18th — don’t wait!

Here’s how to make tax season less terrible:

1. Block 2–3 hours on your calendar to get it done

2. Gather your paperwork:

Bookkeeping software/spreadsheets/notebooks
1099s (It’s okay if you don’t have all of your 1099s – these are for your clients’ records more than they are for yours! But you still have to account for all of your income regardless)
1095-A form (if you have Marketplace insurance)
EIN info and SSN
Banking info
Your tax prep software (I like FreeTaxUSA (no affiliation!!)) or CPA contact

3. Log in to FreeTaxUSA (or hire help)

4. File your taxes and pay or set up a payment plan

5. Get yourself a treat — you did it!

FAQ’s About Freelance Writer Taxes

Do I really need to save 30% of every payment?

Yes — it’s safer than under-saving. You might get some back if you have business write-offs or lower income, but over-preparing = less stress later.

What’s the benefit of an LLC if taxes are the same?

Protection. An LLC can shield your personal assets if someone sues you or you default on business debt.

Can I switch from Sole Prop to LLC later?

Absolutely. Many freelancers start as Sole Props and file as LLCs once they grow or want more protection.

Do I have to pay quarterly taxes forever?

Yes — if you consistently owe more than $1,000 per quarter, you’ll need to pay estimated taxes every year.

Do I need an accountant?

Not required — but if taxes stress you out, a CPA is worth it. Even using a TurboTax expert can make tax season way easier.

Quick Disclaimer Again

This blog is not tax advice. Always check with a licensed tax professional for guidance on your unique situation.

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