Taxes for Freelancers & Consultants
By Chris Brown, Enrolled Agent
“I truly cannot say enough good things about my experience with Chris & Maria at NH Tax Advisors! I came to them with a rather daunting & messy self-employed tax situation, needing resolution for some previous years' filings.”
Whether you call yourself a freelancer, an independent consultant, or a contractor, the IRS sees the same thing: a self-employed person running a business. That changes how you are taxed and opens deductions a salaried job never offered.
Your income goes on Schedule C
Clients pay you without withholding tax, and the larger ones report what they paid on a 1099. That income, minus your business expenses, lands on Schedule C. The net profit is subject to income tax and the 15.3% self-employment tax that covers Social Security and Medicare.
Deductions consultants commonly miss
- A home office used regularly and exclusively for the business
- Software, subscriptions, and professional tools
- Professional development, certifications, and industry memberships
- Business travel and the business-use share of your phone and internet
- A self-employed retirement plan (SEP-IRA or Solo 401(k)), which lowers taxable income while building savings
Pay quarterly so April is boring
With no employer withholding, the IRS expects quarterly estimated payments. Setting aside a percentage of each payment as it comes in keeps you from scrambling at filing time. The Self-Employment Tax Estimator gives you a working number.
When to look at an S-corp
Once your profit is consistently high, an S-corporation election can lower self-employment tax by splitting your income between a reasonable salary and distributions. It adds payroll and a separate return, so it only pays off above a certain profit level. We are happy to run that math with you before you decide.
Talk to your tax professional today
Call to talk through your tax situation with a licensed tax pro who’ll remember you next year.
Frequently asked questions
What can I deduct as a consultant?
Ordinary and necessary business costs, including a home office you use regularly and exclusively, software and subscriptions, professional development, business travel, and the business-use share of your phone and internet.
When does an S-corp make sense for a consultant?
Usually once your net profit is consistently high enough that the self-employment tax savings outweigh the cost of running payroll and filing a separate return. Many consultants reach that point in the low six figures, but it depends on your numbers.