How to File Taxes as a Freelancer: Step-by-Step (No Panic Required)
My first time filing freelance taxes, I sat in front of TurboTax for 6 hours. I didn’t understand Schedule C. I didn’t know what “cost of goods sold” meant for a service business (it’s usually $0). I panicked at every question I couldn’t answer. I missed deductions. I overpaid.
It doesn’t have to be that stressful. After four years of filing, the process takes me about 2 hours of document prep. Here’s the step-by-step.
The Timeline: When to Do What
January 1-15
- Make Q4 estimated tax payment (due January 15)
- Start collecting documents
- Export your annual P&L report from FreshBooks/Wave/QuickBooks
January 16-31
- Receive 1099-NEC forms from clients (due to you by January 31)
- Cross-reference 1099s against your income records — are any missing?
- If a client who paid you $600+ didn’t send a 1099, email them
February 1-28
- Organize all deduction documentation
- If DIY: start your return in tax software
- If CPA: send them your documents by mid-February (they’re less busy early)
March 1-31
- Review draft return (yours or CPA’s)
- File S-Corp return if applicable (due March 15)
April 1-15
- File personal return (due April 15)
- Make Q1 estimated payment for the current year
- If you need more time: file Form 4868 for extension (but pay estimated taxes)
The Documents You Need
Gather these before you start filing:
Income documentation:
- All 1099-NEC forms
- Your annual P&L report from accounting software
- Records of income not covered by 1099s (clients who paid under $600)
- Any other income (interest, dividends, side income)
Expense documentation:
- Annual expense report from accounting software (categorized by type)
- Receipt backup for expenses over $75
- Home office square footage and total home size
- Vehicle mileage log (if applicable)
- Health insurance premium statements (Form 1095-A if marketplace)
Other:
- Prior year tax return (for reference and estimated payment carryover)
- Estimated tax payment records (dates and amounts for all 4 quarterly payments)
- Retirement contribution records (SEP IRA, Solo 401k)
- State-specific forms
Filing Schedule C: The Key Form
Schedule C is your business profit and loss statement. Here’s what goes where:
Part I: Income
- Line 1: Gross receipts (total freelance income for the year)
- Line 4: Cost of goods sold (usually $0 for service freelancers)
- Line 7: Gross income (Line 1 minus COGS)
Part II: Expenses The big section. Key lines for freelancers:
| Line | Category | My Typical Amount |
|---|---|---|
| 8 | Advertising | $200 |
| 9 | Car & truck expenses | $0 (I use home office) |
| 15 | Insurance | $1,200 (business liability) |
| 18 | Office expense | $800 |
| 24a | Travel | $1,200 |
| 24b | Meals (50%) | $400 |
| 25 | Utilities | $1,620 (internet + phone biz portion) |
| 27a | Other expenses | $3,400 (software, professional dev) |
| 30 | Home office deduction | $1,400 |
Line 31: Net profit (or loss) Income minus expenses. This is the number that feeds into Schedule SE for self-employment tax calculation and into your Form 1040 for income tax.
The Filing Process: DIY with Software
If you’re using FreeTaxUSA, TurboTax, or similar:
- Start a new return. Import prior year if available.
- Enter personal information. Standard stuff.
- Enter income. The software asks about W-2s, 1099s, etc. Enter your 1099-NEC forms. Add any unreported freelance income.
- Schedule C section. Software walks you through business income and expenses. Have your P&L report handy — you’ll enter totals by category.
- Home office deduction. Choose simplified ($5/sqft) or actual expenses. Software calculates.
- Self-employed health insurance. Enter premiums paid. This is an above-the-line deduction — don’t miss it.
- Retirement contributions. SEP IRA, Solo 401(k) amounts.
- Self-employment tax. Software calculates Schedule SE automatically.
- Quarterly payments. Enter the amounts you paid in estimated taxes. These reduce what you owe (or increase your refund).
- Review and file.
The Filing Process: With a CPA
My process with my CPA:
-
February 15: I email her a PDF package containing:
- FreshBooks annual P&L report
- FreshBooks expense report by category
- All 1099-NEC forms (scanned)
- Health insurance premium total
- Retirement contribution total
- Quarterly payment dates and amounts
- Any questions I have
-
March 1-5: She sends me a draft return to review.
-
March 5-10: I review, ask any questions, approve.
-
March 10-15: She files. Done.
Total time: 2-3 hours of document prep + 30 minutes reviewing her draft. I spend the time I used to spend on filing doing billable work instead.
Common Filing Mistakes
Forgetting to deduct half of SE tax. You can deduct 50% of self-employment tax on Schedule 1, Line 15. This reduces your AGI. Tax software does this automatically, but if you’re calculating manually, don’t forget it.
Not reporting all income. If a client paid you $400 and didn’t send a 1099, you still owe taxes on it. The IRS cross-references your deposits against reported income. Report everything.
Missing the health insurance deduction. If you pay for your own health insurance, it’s 100% deductible on Schedule 1, Line 17. I missed this for 6 months my first year. Cost: $1,400 in unnecessary taxes.
Filing Schedule C when you should use Schedule C-EZ. Actually, C-EZ was discontinued. Ignore this — just use Schedule C. But some outdated advice still references C-EZ.
Not filing estimated payments with your return. If you made quarterly payments, you MUST report them on your return (Form 1040, Line 26). Otherwise the IRS doesn’t credit your account and you might get a surprise bill.
Extensions: When and How
If you can’t file by April 15, file Form 4868 for an automatic 6-month extension to October 15.
Critical: An extension gives you more time to FILE, not more time to PAY. Estimate what you owe and pay it by April 15. Interest and penalties on unpaid taxes start accruing April 16 regardless of your extension.
I’ve never needed an extension because my CPA files early. But if you’re DIY and behind, filing an extension is infinitely better than filing late without one. The late filing penalty (5%/month up to 25%) is much worse than the late payment penalty (0.5%/month).
State Taxes
Every state is different. Most states with income tax require a separate state return that mirrors your federal filing. Your tax software handles this (usually for an additional $15-50), or your CPA includes it in their fee.
No-income-tax states (lucky you): Alaska, Florida, Nevada, New Hampshire (limited), South Dakota, Tennessee, Texas, Washington, Wyoming.
If you live in one of these states, you still file the federal return. You just skip the state portion.
The Bottom Line
Filing freelance taxes follows a predictable process once you’ve done it once:
- Collect documents in January
- Organize in February
- File in March (or send to CPA)
- Done by April 15
The first year is the hardest because everything is new. By year 2, you know the process and it takes half the time. By year 3, it’s routine.
Use accounting software year-round, track expenses consistently, and the annual filing becomes a 2-3 hour process instead of a 10-hour panic attack. That’s the real secret — the filing itself is easy when your records are clean.