Platforms like Upwork offer designers, writers, and plenty of other freelancers a place to connect with clients.
Choosing the projects you work on and setting your own hours are two of the most appealing parts of freelancing, whether you’re doing it alongside your day job or building a small business full time. But tackling tax season as a self-employed worker isn’t quite as enticing.
We’re here to help. In this article, we’ll cover the taxes you’ll have to pay as an Upwork freelancer, how to get your 1099 tax forms, how business expenses can help you save money, and the tax deadlines you should add to your calendar.
What taxes do you have to pay as an Upwork freelancer?
If you’ve only filed as a “traditional” employee in the past and this is your first year paying taxes with Upwork income, the good news is that you’ll still recognize most of the taxes you owe.
Let’s start with familiar territory.
Federal and state income taxes
Your income tax obligations don’t change as an Upwork freelancer.
Federal taxes are progressive, which means your tax rate will depend on your income level. It might be anywhere from 10-37%. You can find your rate on the IRS website.
Your state tax will depend on where you live. Some states also use the progressive system, while others charge everyone the same flat tax rate.
If you live in one of these states, you won’t have to pay any state income tax:
- South Dakota
If you want to double-check your state’s tax rules and get an idea of how much income tax you’ll owe, check out Keeper’s free income tax calculator.
Self-employment taxes are used to fund Social Security and Medicare taxes.
Self-employment tax is also referred to as “1099 tax” which refers to the 1099 tax forms that freelancers receive. You might also hear it called “FICA tax” — this stands for Federal Insurance Contributions Act.
How self-employment tax is different from employee payroll tax
Again, if you’re also a W-2 employee (or have been one in the past), you’ll likely already be familiar with FICA tax. 7.65% of an employee’s paycheck is deducted for FICA tax, and then the employer matches the same amount. (When an employee pays FICA tax, it’s known as “payroll tax.”)
As an independent contractor, though, you’re responsible for both the employer and employee portion on your self-employment earnings. This totals 15.3%.
If you freelance while also working a W-2 job, your FICA tax rate will be 15.3% on your Upwork earnings and 7.65% on your employee earnings. The steep FICA tax rate is an element of self-employment tax that takes some getting used to. Fortunately, you can deduct the employer portion when you file your tax return.
Want to see an estimate of your FICA tax bill? Check out Keeper’s self-employment tax calculator.
Do all Upwork freelancers have to pay self-employment tax?
What if you found gigs through multiple sources?
The $400 threshold applies to your total 1099 income, not just 1099 income from one source. If you earned $200 through Upwork and then another $300 through Fiverr, for example, you’ll still have to pay.
What if you earned less than $400?
If you earned less than $400, you aren’t on the hook for 1099 taxes. However, it’s still a good idea to report that income to the IRS.
How do tax write-offs affect your total income?
Your taxable income is your gross annual income (all the money you earned from 1099 work throughout the year) minus your business expenses. If your gross income is above $400, but your taxable income is less than $400, you won’t be on the hook for 1099 taxes.
Next, let’s take a closer look at how business expenses can help you save money on your taxes.
Write-offs you can claim as an Upwork freelancer
Whether you offer translation services or cooking lessons through Upwork, you probably pay for tools and resources to do your freelance work.
- A translator might need to pay for certifications, software, or social media ads that promote their Upwork services
- A professional chef needs to buy ingredients, and they’ll likely invest in camera equipment if they offer virtual lessons
These expenses are considered “ordinary and necessary” for those professions, according to the IRS, so the translator and chef could write them off on their taxes.
Here’s why that’s helpful. As mentioned, when you file your taxes, you start with your gross income — all the money you earned in the last year. You can then “write off” a portion of your business expenses, which will leave you with your taxable income. Your taxable income will be used to determine your tax rate.
Tracking your business expenses
Because write-offs can significantly reduce your taxable income — and therefore your tax bill — you want to stay on top of your business expenses throughout the year.
An easy way to accomplish that is with Keeper, an app that keeps an eye on your bank account throughout the year and automatically records any time you make a business purchase.
No need to store receipts or comb through bank statements — when you’re ready to file, you can download your list of write-offs or file your taxes right in the app.
Top tax write-offs for Upwork freelancers
Your write-offs will depend on what type of work you do. And Keeper understands that no two freelancers — or their expenses — are the same. But there are a number of write-offs that typically apply across the board. Here are a few.
- 📱 Cell phone bill
- 💻 Computer equipment
- ⚡ Wi-Fi bill
- 🚗 Car expenses
- 🏠 Home office expenses
- 🏦 Bank fees
- 🎵 Subscriptions
- 💿 Software
- 🍔 Business meals
- ✈️ Business trips
- 🏫 Education expenses
- 🪧 Personal marketing materials
- 🧰 Equipment and tools
- 🖊️ Office supplies
Don’t forget to also write off your Upwork service fees, which come out to 10% of all your earnings.
The 1099 forms you need to file your Upwork taxes
Upwork is required to send a 1099-K form to all qualifying freelancers each year. A 1099-K form documents the total amount of money you earned through Upwork, which you’ll need to know in order to file your taxes.
When does Upwork send out 1099-Ks?
The form will be mailed out by January 31. The IRS also receives a copy.
If it’s early February and you haven’t gotten your 1099, don’t panic. Upwork sends them via snail mail, so they might take a little longer to arrive. Just make sure the mailing address you gave the platform is up to date.
Who qualifies for a 1099-K from Upwork?
You’ll receive a 1099-K for your taxes if you:
- Earned at least $20,000 through the platform
- Received at least 200 transactions
However, the rules are set to change for the 2023 tax year. So when you file your 2023 taxes, you’ll receive a 1099-K if you earned at least $600 across any number of transactions.
How to get your 1099-K from Upwork
Upwork sends the form out via mail — so make sure your address is correct in your Upwork account!
What if you don’t receive a 1099-K from Upwork?
Whether or not you receive a 1099-K, you’ll still need to report your total earnings.
So if yours gets lost in the mail or you don’t qualify for the form, here’s the best way to figure out your gross income:
- Sign in to your Upwork account
- Go to the “Reports” tab
- Select “Transaction History” from the drop-down menu
- Choose a custom date range under “Statement Period”
- Click “Download CSV” to get your transaction history in an Excel spreadsheet
What if you got paid through PayPal?
If you used PayPal to withdraw your Upwork earnings, that money won’t show up on your Upwork 1099-K. Instead, you’ll receive a 1099-K from PayPal documenting that income. This is so your income isn’t double-reported to the IRS.
For more information about the 1099-K from Upwork, check out the Upwork FAQ page.
How to file your Upwork 1099 taxes
Ready to file? Here’s how to submit your tax return to the IRS.
Step #1: Complete your Schedule C
Your Schedule C is used to determine your taxable income. Here’s what you need to do:
- Enter the total income you earned from Upwork
- List all of your business expenses
- Subtract your expenses from your total income to find your taxable income
How to handle Schedule C if you do multiple types of freelance work
Keep in mind that you’ll have to fill out a separate Schedule C for each job you do.
Let’s say the personal chef we mentioned earlier also uses Upwork to find work as an SEO consultant for fellow culinary professionals. On top of that, they occasionally drive for Uber on the weekends.
- One Schedule C for their income and expenses as a personal chef
- A second Schedule C for their SEO work
- A third Schedule C for their Uber work
Now, let’s say our freelancer uses Upwork, Fiverr, and other freelancer platforms to find clients for private chef gigs. Because they’re using all those platforms for the same type of work, they can treat it all as one business. So they’d still use just one Schedule C that records their total income as a personal chef.
Step #2: Complete your Schedule SE
Now that you know your taxable income, you’ll use Schedule SE to determine how much self-employment tax you owe.
Step #3: Complete your Form 1040
Finally, Form 1040 is where you’ll figure out your income tax bill.
Tax deadlines for Upwork freelancers
- If you expect to owe less than $1,000: You can pay all your taxes on April 15th
- If you expect to owe more than $1,000: You’ll have to make estimated quarterly tax payments throughout the year
If you belong to the second group, you’ll pay your quarterly taxes on:
- Quarter 1: April 15th
- Quarter 2: June 15th
- Quarter 3: September 15th
- Quarter 4: January 15th
Add these dates to your calendar to avoid any late penalties.
While you should try to pay a close approximation of what you’ll actually owe, remember that the IRS provides a 10% buffer to quarterly filers. As long as you don’t underpay by more than 10%, you’ll avoid penalties. When in doubt, it’s better to slightly overestimate what you should pay. If you send too much, you’ll get the surplus back as a tax refund.
The most challenging part of doing your Upwork taxes is the prep work: making a list of your expenses and ensuring you have the right forms and information. Remember that Keeper can lend a hand year-round to stay organized and save money with tax deductions. At tax time, we can even help you file.
Over 1M freelancers trust Keeper with their taxes
Over 1M freelancers trust Keeper with their taxes
Over 1M freelancers trust Keeper with their taxes
Sign up for Tax University
Get the tax info they should have taught us in school
At Keeper, we’re on a mission to help people overcome the complexity of taxes. We’ve provided this information for educational purposes, and it does not constitute tax, legal, or accounting advice. If you would like a tax expert to clarify it for you, feel free to sign up for Keeper. You may also email email@example.com with your questions.