Doing your Fiverr 1099 taxes can feel like standing at the base of a mountain you have to climb. You don't know where to start but you know it has be done perfectly. This guide has everything you need to go from being overwhelmed to filing your taxes with ease. If you read this whole article, you will know exactly how to lower your tax bill as much as humanly possible.
Reporting your Fiverr 1099 income
It's super important to know that Fiverr does not withhold taxes for you. That means you are solely responsible to pay your taxes to the internal revenue service.
As a Fiverr seller you are responsible for three main types of taxes.
The first categories are federal and state income taxes. The exact rate you have to pay depends on both your federal and state tax brackets, which can vary depending on how much you make. Federal taxes run from 10% to 37%, while state income taxes can range from 0% to 13.3%.
To find out the exact percentages you need to save for all your taxes use our free income tax calculator. You could also use the IRS Schedule SE Self Employment Tax form to find out what you owe, but it is more complicated.
The next category of taxes you have to pay are self-employment taxes, also known as FICA taxes. This stands for the Federal Insurance Contributions Act, which includes Medicare and Social Security. The Medicare tax rate is 1.45% while Social Security is 6.2%, which totals 7.65%.
This portion of Self employment income taxes has to be paid by both the employee and employer. Fiver and Upwork gig workers are classified as independent contractors by the IRS. This means that as a freelancer, you are both the business and the employee so will have to pay a total of 15.5%. The good news is you may be able to write off the employer portion of FICA taxes as a business expense. More on how to do that later.
Now that you understand your tax liability, let's go over how to get your income information.
Understanding Fiverr 1099 tax forms
As a general rule for most companies, if you make $600+ in taxable income over the calendar year, then you are supposed to get a 1099-NEC Non-Employee Compensation form. This is replacing the Form 1099-MISC Miscellaneous Income from previous years.
However, at the time of writing this article Fiverr will not send you a 1099 because they are not an American company and don't have a US address.
It's a very common mistake for Fiverr sellers to think they don't have to report their income if they don't get a 1099. To be clear, any amount you make from Fiverr has to be reported even if you made under $600 or do not receive a 1099.
The only form you might get for your Fiverr gigs is a 1099-K from PayPal, but you generally need to make over $20,000 and have 200+ transactions to get one.
If you are from Vermont, Massachusetts, Virginia, or Maryland then you will get a 1099-K if you processed $600+ in total payments from PayPal. Illinois has a slightly different limit of $1,000 in sales and at least 3 transactions.
If you don't receive a 1099-K from PayPal by January 31st, then you most likely won't get one from them. If you know that you are supposed to get one but haven't contact their customer support before filing your taxes.
If you made less than the minimum requirements for your state, then you need to get your income information from your Fiverr account.
Go to the "Earnings" tab on your Fiverr.com dashboard. Select the year you need to pay taxes for and then "Export to CSV". This will give you all the taxable earnings that you made after the Fiverr fees were already withdrawn. Keep this information close by, because you will need it when you fill out your Form Schedule C Profit or Loss From Business.
Now that you have your income information, you need to figure out if you owe quarterly taxes or not.
When are Fiverr taxes due?
If you are on track to owe the IRS $1,000 or more at the end of the year, then you need to pay estimated quarterly taxes.
Quarterly estimated taxes are due on:
Q1: April 15th
Q2: June 15th
Q3: September 15th
Q4: January 15th
If you don't pay enough in quarterly taxes you could owe up to 25% in under payment penalties. Make sure you understand exactly how much to pay in estimated taxes to avoid this problem. The best way is to use a trust worthy quarterly estimated income tax calculator.
Unfortunately, taxpayers are not allowed to write off business expenses when they pay quarterly taxes. You have to wait until you do your annual taxes between January to April 15th.
It's important to keep your expenses for the tax year organized well before the annual due date to avoid paying too much.
Writing off tax-deductible business expenses
In order to lower your tax bill, you need to keep a detailed record of all your business related expenses. You can do this with a separate business credit card and bank account. However, the easiest way is to use a 1099 expense tracking app to automatically categorize your transactions, so you can put your focus on doing more Fiverr gigs.
Some examples of Fiverr tax deductible expenses:
- Software you use to complete gigs
- Home office deduction
- Employer portion of FICA taxes
- Accounting and expense tracking software
- The business use portion of your computer, phone and internet bill
- Legal fees such as your business entity license
- Business loan interest
- Paying for a babysitter while you work
- Education and training related to your industry
Once you have all your tax deductible expenses in one place, you can begin filling out your Form Schedule C Profit or Loss From Business. You will put in all your income information along with your expenses so you can lower your tax bill. However, filling out forms can feel complicated compared to other ways to report taxes.
File your taxes online
Doing your own tax return as sole proprietorship, small business or self-employed freelancer should not be challenging. Keeping track of papers is a hassle and mailing in your taxes takes forever. The best way to file your taxes is through an easy to follow online tax filing software. That way instead of trying to follow instructions for complicated IRS forms, you can use a simple step-by-step system to file your taxes thoroughly.
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At Keeper, we’re on a mission to help people overcome the complexity of taxes. That sometimes leads us to generalize in our educational content. Please email email@example.com if you have questions.