As a freelancer on Upwork, you're responsible for paying taxes on your income. While Upwork can provide you with a 1099-K tax form to help with reporting, it's crucial to understand your tax obligations and consult a tax professional for personalized advice.
Understanding your tax forms
Upwork issues a 1099-K form if you meet both of these criteria:
- Earned $20,000 or more in total during the tax year (as of the 2023 tax year).
- Provided services in the United States.
The 1099-K form will report your total earnings on Upwork for the year. It's important to keep this document for tax filing purposes.
The 1099-K form is used to report payments made to US taxpayers, to the IRS. You'll receive a form if you are a US person and you received at least $20,000 in payments from your Upwork clients, or you have 200 or more transactions on Upwork. Eligible transactions only include payments, hourly invoices, fixed price, invoices, and bonuses are all considered transactions, fees, taxes, withdrawals and refunds do not count as eligible transactions. PayPal is also distributing forms 10 99 K for their qualifying customers. Upwork will file the form with the IRS and you'll receive a copy of your form by January 31st. This form will help you document your yearly income as you prepare your taxes.
Additional tax considerations
- Self-employment tax: Freelancers are responsible for paying Social Security and Medicare taxes, which are typically covered by employers for traditional employees.
- Business expenses: You may be able to deduct certain business expenses from your taxable income. These expenses could include office supplies, software subscriptions, or professional development courses.
- Estimated taxes: As a freelancer, you don't have taxes automatically withheld from your income. It's your responsibility to make estimated tax payments throughout the year to avoid penalties.
To find information on taxes and forms, go to Manage finances under your Upwork profile, and select Tax forms or Tax information. You'll be prompted to reenter your Upwork platform password for security purposes.
Resources for freelancers
- Upwork Help Center: Upwork's Help Center offers additional information on taxes and tax forms.
- IRS website: The IRS website provides a wealth of information for taxpayers, including resources specifically designed for self-employed individuals. Note that all U.S. citizens and resident aliens must file a U.S. individual income tax return, even if they permanently live outside the United States, and may not owe any tax because of income exclusion or tax credit.
Tax laws can be complex, and this lesson is meant as a general overview. It's essential to consult with a tax professional to ensure you are filing your taxes correctly and taking advantage of all available deductions and credits. Take advantage of tax talent on Upwork. By being proactive about taxes, you can avoid any unexpected surprises come tax season.
