How To Calculate and File Upwork Taxes

If you have been working freelance using sites like Upwork, you may be wondering how to file Upwork taxes. Regardless how often you work on Upwork, your income from the platform could affect your tax requirements. Here is what you need to know about Upwork taxes. 

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Upwork Tax Information

As an Upwork freelancer, you need to be aware of a few important things regarding taxes. First, understand that you’re self-employed because you work as an independent contractor. As a result, Upwork withholds no taxes from your income. You might have to make estimated taxes to cover any self-employed taxes you owe. It’s your responsibility to report and properly remit your tax payments.

Another thing to keep in mind when it comes to working as an independent contractor is that you will incur certain business expenses that are tax-deductible. This can be a huge benefit when it comes time to preparing and filing your taxes. Some common tax deductions for freelancers include:

  • Equipment Depreciation – Did you buy a new computer this year? You can depreciate the cost of equipment purchases over the course of its useful life. This spreads out the tax benefits. 
  • Home Office Tax Deduction – This includes a portion of your home expenses like rent, mortgage, insurance, repairs, and utilities. To calculate this you must figure the total percentage of space you use exclusively as a home office, exclusively being the operative word. The space must be solely and expressly used for business. 
  • Marketing Expenses – Money spent on business cards, websites, and ads can all be deducted.
  • Meals – Did you meet with a new client for lunch? Save your receipts.
  • Service Fees – The service fees Upwork charges are considered a deductible expenses
  • Subscriptions – Do you have a membership for stock images? 
  • Travel Expenses – Did you travel to meet with a new client, or attend a conference? All are deductible expenses. This includes airfare, car rental, mileage, insurance, hotel accommodations, and tickets to conferences or trade shows. 

How Much Money Do You Have to Make to Pay Taxes?

When preparing your taxes you need to total your taxable incomes. This includes all sources of income. So, if you held down a 9-5 and also worked freelance, both sources of income combine to form your taxable income. If your total income is over $10,400 you need to file taxes. In addition to income taxes, you may also be required to pay estimated taxes. If you anticipate owing more than $1,000 in taxes, you will need to pay estimated taxes. 

Upwork 1099

Form 1099 is an independent contractor tax form that reports income that doesn’t qualify as W2 earnings. There are several different types of 1099s, and each reports different sources of income.

As an independent contractor working with Upwork, you might receive a 1099K. However, it is important to note, that Upwork does not always issue 1099s. Upwork only issues a 1099K if you have over 20K in revenue AND over 200 transactions on the platform. If you did not meet both of these requirements, you won’t receive a 1099K. However, you still have to report your income. If you do receive a 1099K from Upwork, you will not only have to report it but report it accurately, as the IRS also receives a copy. 

Learn more about reporting your Upwork income for tax purposes in this helpful post from Upwork.

upwork taxes for freelancers

Upwork and Estimated Tax Payments

As mentioned above, if you expect to owe more than $1,000 in taxes, you will need to pay estimated taxes. Estimated taxes are due on a quarterly basis:

  • First Quarter – April 15
  • Second Quarter – June 15
  • Third Quarter – September 15
  • Fourth Quarter – January 15

The easiest way to calculate your estimated tax payments is to take the total amount you paid in taxes for the previous year and divide that by 4. You can adjust this amount can be adjusted if need be. As an independent contractor, it’s a good idea to set up a tax savings account and save 20% to 30% of your income for taxes. 

In addition to estimated taxes, you could be liable for self-employment taxes. The self-employed tax consists of both the employer and employee portions of social security and medicare tax. The effective self-employed tax rate is 15.3%. One thing about paying self-employed taxes is that the employer portion or half of your self-employed taxes are tax-deductible. 

There are several ways you can pay your taxes. Online and by mail are two of the most common. Submitting payments online is the easiest way to cover your estimated taxes and self-employed taxes. You can pay with a checking account or by credit card. Learn more about ways to pay your taxes here

More Help With Upwork Taxes

Each tax scenario is different. The more sources of income you have the better off you are working with a tax advisor. If you work as an independent contractor, you can save money on taxes by working with a tax advisor. A tax advisor will explore all tax deduction and tax credit options to save you the most money. In addition, your tax advisor knows the tax code so that you don’t have to, saving you time and stress

Working with a tax advisor throughout the year and not just during tax season is a good way to set yourself up for success when it comes to your taxes. A tax advisor can be more than just a tax preparer. They can provide financial counsel and help you with forecasting revenues, strategizing income and expenses, and help leverage tax deductions. They can also help you set up a tax savings account and plan for retirement. Set up a strategy session with one of the tax experts at Shared Economy today. For more information on Upwork taxes subscribe to our newsletter. 

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