As a freelancer, you are considered an independent contractor, not an employee, so you won’t have taxes withheld from your earnings. That means it’s up to you to set aside money for taxes throughout the year, rather than waiting until tax time.
The IRS requires all independent contractors to pay taxes on their earnings, and if you don’t pay your taxes, you could be subject to interest and penalties.
If you’re new to freelancing, you may be wondering how much you should set aside for taxes. A good rule of thumb is to set aside 30% of your earnings for taxes.
So, if you earned $1,000 from a client, you would set aside $300 for taxes.
Of course, this is just a general guideline, and your actual tax liability will depend on a number of factors, including your income level and whether you live in a state with income tax.
If you’re not sure how much you should be setting aside for taxes, it’s a good idea to talk to an accountant or tax advisor. They can help you determine your estimated tax liability and create a plan for paying your taxes throughout the year.
Do You Pay Tax on UpWork?
UpWork is considered a freelancing platform, which means that the workers on the site are considered independent contractors, not employees.
Because of this classification, the workers are responsible for their own taxes and are not have any withheld from their earnings by UpWork. This is something that all freelancers have to keep in mind- they are responsible for setting their own money aside for when tax season comes around instead of waiting until the last minute like most people do with their annual taxes.
The IRS requires that all independent contractors pay taxes on their income and if they do not comply with this law they could end up being penalized with interest or other consequences. Because of this it’s important that if you’re new to freelancing on UpWork or any other site, that you take into consideration how much money you will need to set aside for when tax season comes around.
A general rule of thumb is to set 30% of your earnings from each client aside so that come tax time you will already have the money saved up instead of scrambling to come up with it last minute. However, everyone’s circumstances are different so it’s best to speak with an accountant or tax advisor in order to get a better estimate of how much money you should be setting aside each time you get paid by a client through UpWork.
