There’s a certain level of freedom that comes with freelancing — you get more flexibility, more control over workloads, and it is a lifestyle you can mold to fit your everyday life to get out of the 9–5. But one thing most people are wildly unprepared for is taxes. And with 76.4 million freelancers in the US alone — 1.57 billion globally — this is a huge sum of people potentially getting their taxes wrong on a regular basis.
Most tax problems aren’t dramatic fraud-level events; they’re the small practical errors that people make too easily because they don’t understand or because they’re unsure of what they’re supposed to do. It’s the missed deduction, poor record keeping, guessing estimated payments, mixing personal and business money, or using the wrong accountant, for example.
This post is going to focus on fixing these fundamental issues so you can be confident you’ve covered all your bases.
Separate Your Business and Personal Money Immediately
If you’re still running everything through one personal bank account, this is the first thing you need to address. It causes confusion, messy records, and major headaches at tax time.
Open a separate checking account just for freelance income and expenses. Run all client payments into that account. Pay all business costs from that account: subscriptions, software, equipment, education, internet portion, phone portion, and marketing. Everything business-related goes through one place, nothing else.
This instantly gives you clearer records and makes it so much easier to understand how much you’re earning, and it gives you greater protection if you’re ever audited.
Track Income and Expenditure Weekly
To make sure nothing is missed, you really need to be tracking things weekly, especially at first, and if you feel confident, you can leave it to monthly. Why? The main reason freelancers lose money is that they can’t remember what they have spent.
Trying to reconstruct a year’s worth of expenses in March is how deductions disappear. It’s the coffees you bought in the café when working one day, the software subscription you canceled, the online course you bought, etc.
Pick a simple system; it doesn’t need to be complicated or expensive. It can be a spreadsheet, accounting app, or bookkeeping software. It doesn’t actually matter; you just need consistency.
Then each week, review your transactions, categorize them, label income, tag expenses, upload receipts if your system supports it. Once you get into the habit of doing it, it will take little time.
Understand Estimated Quarterly Taxes
Freelancers in the US are expected to pay as they go. What this means is doing estimated quarterly taxes instead of one big bill at the end of the year.
These are typically due:
- April
- June
- September
- January
Miss them and you may owe penalties even if you pay your tax bill in full later.
A simple starting rule freelancers use is to put away 25 to 30% of income for taxes, not because of the exact rate but because it creates a buffer. High earners may need to put away more, lower earners less. But this gives you a good place to start from, and you can adjust from here if needed.
Another good tip is to estimate your annual income and split it into four. Then pay this amount equally every quarter. Even a rough estimate is better than ignoring it entirely.
Don’t Guess Deductions
This will land you in trouble fast. And you need to know exactly what deductions you’re entitled to make.
Common legitimate deductions include:
- Home office (if you qualify properly)
- Business portion of internet and phone
- Laptop, camera equipment used for work
- Software subscriptions
- Professional services
- Marketing and advertising
- Education and training directly related to your work
- Business travel
- Client meals (within its rules)
The problem isn’t usually in the claiming; it’s the guessing.
For example, the home office is only deductible if you exclusively and regularly use your office. A desk in your living room doesn’t count, nor does your kitchen table or your couch.
Take some time to understand the IRS criteria and ensure you know what does and does not apply to you in relation to deductions.
Keep Receipts
The IRS does not require you to submit receipts when you submit your tax return, but it can request them later. If you can’t prove an expense was business-related, it can be disallowed.
You don’t need shoeboxes full of paper; you can scan or take images and keep digital copies instead. Email receipts, screenshots, PDF invoices all count — whatever works for you. Keep the receipt for anything you pay for that is for your business so you can create records that back up your returns.
Stop Treating Tax Season Like a Once-a-Year Event
A lot of freelancers fall into the pattern of ignoring finances all year, then panicking once January arrives. That’s when mistakes happen.
Instead, treat tax awareness as part of running your business. Review your income monthly, check your expense categories, and make sure you’re setting aside enough money for taxes. Then if income changes, adjust so you’re still on the right track.
Choose the Right Accountant
An accountant isn’t just an accountant. You need to find one that specifically understands the work you do. Freelancers often don’t do “traditional” job roles, meaning some accountants, who are perfect for general and common businesses, aren’t suited to the work you do.
If you’re a digital creator, for example, and work exclusively online with multiple income streams, international clients, subscription income, etc., you need an accountant who understands this.
Different freelancers have different niches, and this means different tax nuances too. A graphic designer’s deductions will be different from a YouTube creator’s income. Services like an OnlyFans CPA exist specifically because niche work creates niche tax complexity. So making sure your accountant’s experience is close to the work you do means you can get better results come tax time.
Don’t Ignore 1099 Forms
If you receive 1099-NEC forms from clients or platforms, you must report that income. The IRS receives copies too. If you leave income off your return, mismatches trigger notices.
But also don’t assume 1099s are always accurate either. Platforms sometimes make mistakes, clients might issue duplicates, and there might even be income reported that was refunded or never actually paid. Compare all 1099s with your own records to make sure everything is correct, and don’t be afraid to ask for a corrected form if you notice a mistake.
