{"type":"video","version":"1.0","html":"","height":864,"width":1152,"provider_name":"Loom","provider_url":"https://www.loom.com","thumbnail_height":864,"thumbnail_width":1152,"thumbnail_url":"https://cdn.loom.com/sessions/thumbnails/1cd522e6bf544946a7742f212e314cf6-1655924455336.gif","duration":232,"title":"How to Navigate Freelancer Taxes","description":"Welcome to Pangea Academy. Here's what you need to know about navigating freelancer taxes.\n\nAs a disclaimer, this is for educational purposes only and should not be taken as financial advice. Please consult a tax professional for personalized tax recommendations.\n\nSo how do taxes actually work as a freelancer? Taxes tend to make a lot of people really stressed and overwhelmed, but especially freelancers. So let's break it down.\n\nAs a freelancer, you are considered self-employed, which means that you are subject to both regular income tax and self-employment tax. In a traditional role, you would get your taxes taken out of every single paycheck, and that would cover your contributions to programs like social security and Medicare. But as a freelancer, because you don't have an employer taking that money out of every paycheck, you will have to pay into those programs on your own, through self-employment tax.\n\nFor example, in 2021, self-employment tax was 15.3% for reference. \n\nSo as you can imagine, because that money isn't coming out of your paycheck automatically, you will need to save for taxes on your own. You should save 30% of your gross income, which should cover both income tax and self-employment tax. \n\nHowever, there are some things that you can write off as a freelancer, which could reduce the amount that you end up owing in taxes. You can take tax deductions for reasonable expenses related to your business, such as educational courses, required equipment like a camera lens or ring light, office supplies, software such as Canva, and business-related food, which would be for things like in-person meetings with clients.\n\nThese must be reasonable expenses, and you will need to show proof that they're relevant to your business. So you can't just write off anything. Now that you know that, here's how to actually file freelancer taxes.\n\nAgain, you want to start by making sure that you save for taxes. Save 30% of your gross income. For example, on a $1,000 project, you would want to save $300 for taxes, meaning that you net $700.\n\nWe recommend setting aside this money in a separate account so it's out of sight out of mind and you don't end up accidentally using it for something else.\n\nThen you want to start the process of filing a 1099 tax form. In a traditional role, you would get a W-2 tax form, but as a freelancer, you will file a 1099. A 1099 shows the IRS the different types of payments you've received from individuals or businesses that are not your employer.\n\nEssentially that just means that because you have multiple clients, you will have money coming from different places. A 1099 essentially just summarizes that for the IRS to show them how you made money To submit the 1009, you want to use tax preparation software such as Turbo Tax or consult with a certified tax accountant. 1099 forms, however, can be accessed on the IRS website.\n\nAfter you submit the 1099, you will likely find that you owe money in taxes. Don't worry. This is because you haven't actually paid taxes yet on any of your income.\nAnd that's why you have 30% saved away. Again, deductions may make the amount you owe less than expected (less than that 30% you've saved) but regardless, you should always save 30% just in case.\n\nSo to recap, make sure that you save 30% of your gross income for taxes. If saving that on your own feels overwhelming, and you feel like you might need assistance in saving for taxes, sign up with Catch. Catch is a portable benefits platform, and they can help you save automatically for taxes, right from your smartphone."}