When you work online through UpWork, you are considered an independent contractor. This means that you will be responsible for paying your own taxes. UpWork does not withhold any taxes from your earnings, so it is important to set aside money each month to make sure you have enough to cover your tax bill.
There are two types of taxes you will need to pay as an independent contractor: federal income tax and self-employment tax. Federal income tax is a percentage of your earnings that you pay to the government.
The amount you owe depends on how much money you make and your tax bracket. Self-employment tax is a Social Security and Medicare tax that all business owners need to pay. The current self-employment tax rate is 15.3%.
To calculate how much self-employment tax you will owe, multiply your net earnings (what’s left after deducting expenses) by 0.153. For example, if you made $1,000 after deducting expenses, you would owe $153 in self-employment tax.
In addition to federal income tax and self-employment tax, you may also owe state and local taxes depending on where you live and work. Check with your state and local government to see if you need to pay any additional taxes.
When it comes time to file your taxes, UpWork will provide you with a 1099-MISC form that shows how much money you made through the platform. You will use this form to calculate how much taxes you owe. You will then need to file a Schedule C form with your personal income tax return to report your business income and expenses.
Paying taxes as an independent contractor can be confusing, but it’s important to stay on top of it to avoid any penalties or interest charges from the IRS. If you have any questions, please consult a qualified tax professional.
How Much Is UpWork Taxed?
When working online through UpWork, freelancers are considered independent contractors by the Internal Revenue Service (IRS). This means that they will be responsible for paying their own taxes rather than have them withheld by an employer.
Since UpWork doesn’t withhold any taxes from a freelancer’s earnings, it’s important for them to set aside money each month so they have enough saved up to cover their entire annual tax bill.
There are two types of taxes that independent contractors need to pay: federal income tax and self-employment tax.
Federal income tax is a percentage of what a freelancer earns that goes towards supporting the US government. The amount an individual owes depends on how much money they make annually and which tax bracket they fall into.
Self-employment tax is a Social Security and Medicare contribution that all business owners (including freelancers) need to pay. As of 2019, the current self-employment rate is 15.
To calculate how much self-employment one owes, they must take their net earnings (what’s left after deducting expenses) and multiply it by 0.
For example: If after subtracting all expenses, a freelancer earned $1,000 USD, they would owe $153 in self-employment tax.
In addition to federal income and self-employment taxes, some states also require their residents who work online (regardless of where the client is located) pay what’s called a “use”, “occupation”, or “privilege” tax.
These vary from state to state so it’s important for those who think they may owe these additional taxes research their own state laws regarding this matter.[1][2][3][4]
When filing taxes at the end of the year or fiscal quarter, UpWork provides all contractors with a 1099-MISC form which itemizes how much money was earned through the platform during that period.[5]
. A Schedule C form must then be filed along with the 1099-MISC as part of the freelancer’s personal income return in order to report both business income and expenses.[6][7].
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Paying quarterly or annual taxes can be confusing for those new (or unfamiliar) with filing as an independent contractor but it’s important not fall behind or face penalties from the IRS.. If there are ever any questions related specifically to one’s individual circumstances or situation, it’s best practice seek out the advice of qualified accountant or other type of financial professional familiar with US taxation law..
