Taxation of Freelancers and Gig Workers
The taxation of freelancers and gig workers refers to the process by which individuals who earn income through self-employment or short-term contracts are required to report and pay taxes on their earnings.
Freelancers and gig workers, often categorized as independent contractors, must report their income on their personal tax returns. This includes income from various sources such as freelance projects, rideshare driving, or other gig economy jobs. Unlike traditional employees, they do not have taxes withheld from their paychecks, making it essential for them to track their income and expenses throughout the year.
They are typically subject to self-employment tax, which covers Social Security and Medicare taxes, in addition to regular income tax. Deductions for business-related expenses, such as equipment, supplies, and home office costs, can reduce their taxable income.
For accurate tax reporting, freelancers and gig workers should maintain thorough records and may need to make estimated tax payments quarterly to avoid penalties.
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