How Freelancers Can Prepare for Tax Season Without Stress

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 writer, the better you understand your taxes (and the sooner you prepare), the easier life gets when April rolls around.

Tags
CEO Dayfreelancingfreelanceworkflowbusiness setupmoney mindset
Author

Rachel Meltzer

Quick disclaimer: I’m not a tax expert. This blog isn’t tax, legal, or financial advice — it’s simply what I’ve learned while setting up my own freelance writing business. If you have questions about your specific situation, talk to a real tax professional.

Now that we’ve got that out of the way — taxes can feel overwhelming, even when you aren’t a freelancer. But as a self-employed writer, the better you understand your taxes (and the sooner you prepare), the easier life gets when April rolls around.

This isn’t everything you’ll ever need to know — but it is a crash course to help you get started. Let’s make taxes less terrifying, one tip at a time.

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?

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, 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 — but if you habitually underpay, those fees add up fast.

If you know you struggle to save, you can 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 has payment plans.

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

Important: File on time anyway. Even if you can’t pay the full amount, you can pay any amount toward your total — no strict payment schedule required.

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

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
  • 1095-A form (if you have Marketplace insurance)
  • EIN info
  • Banking info
  • Your tax prep software or CPA contact

3. Log in to TurboTax (or hire help — worth every penny)

4. File your taxes or set up a payment plan

5. Pour yourself a drink — you did it!

FAQ’s About Freelance Writer Taxes

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

A: 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.

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

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

Q: Can I switch from Sole Prop to LLC later?

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

Q: Do I have to pay quarterly taxes forever?

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

Q: Do I need an accountant?

A: 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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