When you work as a freelancer, you are self-employed. This means that you are responsible for paying your own income taxes.
The good news is that you can deduct many of your expenses, which can help lower your tax bill. Here is a guide to understanding how to pay taxes on Fiverr.
As a freelancer, you will need to pay two types of taxes: income tax and self-employment tax.
Income Tax
Income tax is the tax you pay on the money you earn. The amount of income tax you owe depends on your income and filing status.
For example, in 2020, a single filer with an annual income of $39,475 or less would owe 10% in federal income tax. A filer with an annual income of $84,200 or less would owe 12%.
You will need to pay state and local income taxes as well. The amount you owe will depend on the state and locality in which you reside.
Self-Employment Tax
Self-employment tax is a Social Security and Medicare tax for individuals who are self-employed. It is equal to the Social Security and Medicare taxes that would be withheld from an employee’s paycheck.
For 2020, the self-employment tax rate is 15.3%. This includes 12.4% for Social Security and 2.9% for Medicare.
The Social Security portion is subject to a wage base limit, which means that once your earnings exceed a certain amount, you no longer have to pay the Social Security tax on the excess earnings. For 2020, this wage base limit is $137,700.
You will need to pay self-employment tax if your net earnings from self-employment are $400 or more.
How to Pay Your Taxes
You will need to file a federal income tax return if your gross income is more than $12,200 (or $24,400 for married couples filing jointly). You can file your return electronically using IRS e-file or by mailing in a paper return. The deadline for filing federal income taxes is April 15th.
If you owe taxes, you will need to make a payment when you file your return. You can make a payment online, by phone, or by mail.
You can also set up an installment plan if you cannot pay the full amount owed immediately.
The best way to ensure that you are correctly paying your taxes on Fiverr is to use an accounting software like Quickbooks Self-Employed or TurboTax Self-Employed . These software programs will help you track your expenses and calculate how much you owe in taxes.
How Do I Pay Taxes on Fiverr?
When you work as a freelancer, you are responsible for paying your own income taxes.
The good news is that many of your expenses can be deducted from your taxable income.
To calculate how much tax you owe on Fiverr earnings:
- First, calculate your total taxable revenue by subtracting any business expenses from your total earnings.
- Next, use IRS Tax Tables (found in IRS Publication 505) to find out how much federal income tax you owe based on your filing status and taxable revenue.
- Finally, calculate any state and local taxes owed.
Note: Self-employment tax
. In addition to regular income taxes, freelancers must also pay self-employment taxes (Social Security and Medicare). The current rate for self-employment tax is 15.3%, which includes 12.9% for Medicare).
How & When To Pay Taxes: You will need to file a federal income tax return if your gross annual income exceeds $12,200 (or $24,400 for married couples filing jointly). Your return must be postmarked by April 15th.
. If you owe any taxes, payments can be made online, by phone, or by mail.
The best way to make sure that all of your Fiverr earnings are properly taxed is to use an accounting software like Quickbooks Self-Employed or TurboTax Self Employed.
