Taxes for Freelancers & Consultants
By Chris Brown, Enrolled Agent
I truly cannot say enough good things about my experience with Chris & Maria at NH Tax Advisors! I came to them with a rather daunting & messy self-employed tax situation, needing resolution for some previous years' filings.
Whether you call yourself a freelancer, an independent consultant, or a contractor, the IRS sees the same thing: a self-employed person running a business. That changes how you are taxed and opens deductions a salaried job never offered.
Your income goes on Schedule C
Clients pay you without withholding tax, and the larger ones report what they paid on a 1099. That income, minus your business expenses, lands on Schedule C. The net profit is subject to income tax and the 15.3% self-employment tax that covers Social Security and Medicare.
Deductions consultants commonly miss
- A home office used regularly and exclusively for the business
- Software, subscriptions, and professional tools
- Professional development, certifications, and industry memberships
- Business travel and the business-use share of your phone and internet
- A self-employed retirement plan (SEP-IRA or Solo 401(k)), which lowers taxable income while building savings
Pay quarterly so April is boring
With no employer withholding, the IRS expects quarterly estimated payments. Setting aside a percentage of each payment as it comes in keeps you from scrambling at filing time. The Self-Employment Tax Estimator gives you a working number.
When to look at an S-corp
Once your profit is consistently high, an S-corporation election can lower self-employment tax by splitting your income between a reasonable salary and distributions. It adds payroll and a separate return, so it only pays off above a certain profit level. We are happy to run that math with you before you decide.
Talk to your tax professional today
No forms, no phone trees. Reach Chris directly about your tax situation.
Frequently asked questions
What can I deduct as a consultant?
Ordinary and necessary business costs, including a home office you use regularly and exclusively, software and subscriptions, professional development, business travel, and the business-use share of your phone and internet.
When does an S-corp make sense for a consultant?
Usually once your net profit is consistently high enough that the self-employment tax savings outweigh the cost of running payroll and filing a separate return. Many consultants reach that point in the low six figures, but it depends on your numbers.