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nicole-bauer
Community Member

Tax Information

Hi There!

 

Will Upwork send each freelancer a W-2 form at the end of each tax year? If not, will each freelancer be responsible for doing this?

I know in the USA we submit a W-9 does that mean the serice fees take out the federal taxes for Upwork Freelancers?

IF not, what are the service fees for?

How do freelancers go about paying state and federal taxes if it isnt taken out of our pay?

4 REPLIES 4
g_vasilevski
Retired Team Member
Retired Team Member

Hi Nicole,

 

I would suggest consulting yourself with a local specialist on how to report your earnings from Upwork and about your taxes. 

All freelancers who are U.S persons should file a Form W-9 with Upwork (all others should file a Form W-8BEN). Thank you.

~ Goran
Upwork
petra_r
Community Member


Nicole B wrote:

 

Will Upwork send each freelancer a W-2 form at the end of each tax year?


W-2 is for employees.
Freelancers are not employees.

 


Nicole B wrote:

I know in the USA we submit a W-9 does that mean the serice fees take out the federal taxes for Upwork Freelancers?


LOL, no. You do your own taxes. The service fee is nothing to do with taxes.

 


Nicole B wrote:

 

IF not, what are the service fees for?


The service fees pay for Upwork...

 


Nicole B wrote:

 

How do freelancers go about paying state and federal taxes if it isnt taken out of our pay?


You do your tax returns as a self-employed person.

 

You and your (California based) client may need to check if your relationship might not cross-over into "employment" territory - best check with a specialist.

 

But ultimately you need to set your rates in such a way that they include your business expenses (such as fees) AND applicable taxes..

 

 

 

florydev
Community Member


Nicole B wrote:

Hi There!

 

Will Upwork send each freelancer a W-2 form at the end of each tax year? If not, will each freelancer be responsible for doing this?

I know in the USA we submit a W-9 does that mean the serice fees take out the federal taxes for Upwork Freelancers?

IF not, what are the service fees for?

How do freelancers go about paying state and federal taxes if it isnt taken out of our pay?


Disclaimer: I am not a tax professional or accountant...

 

A W-9 is a request for taxpayer identification number and it is used as a method of confirming your taxable status in the US, that's it.

 

Here is Upwork's page on US tax status:

https://support.upwork.com/hc/en-us/articles/211063958-Report-Income-from-Upwork

 

Some key points:

 

You will not receive a W-2 unless you are paid through Upwork Payroll, this is where Upwork works as a staffing agency and I have no idea about that process.

 

You will likely not receive any tax forms for your income derived from Upwork.  You will only receive a 1099-K if you have more than 200 transactions and make more than $20k.  It is important to realize that's an AND...so if you manage to do 200 jobs in a tax year that is the only way you will receive that form.

 

The work you do on Upwork is likely as a self-employed person so you are responsible for your own taxes.  You file your taxes in by the April deadline just like everyone else.  You also pay your taxes like everyone else.  If you net more than $400.00 as a SEP you are required to provide it as income on your tax form.  You also must pay Self-Employment taxes as well which is 15.3%.

 

You can read all of this here: https://www.irs.gov/taxtopics/tc554

 

On top of that, you and every other self-employed person should pay your estimated taxes quarterly (https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes).  If you fail to pay enough taxes to cover your eventual tax bill you will pay a penalty of 4%.  You can pay your Federal estimated taxes online, there is a link in that article, I use Direct Pay.  There is likely an online method for the state you live in.  You may also have city and county taxes as well depending on your jurisdiction.

 

When you file your taxes you will have to pay any taxes due at that point as well (just like you would now) or you may receive a refund.

 

You may have come to this question which is how can I know how much money I will make in a year to know what taxes I should pay quarterly to not suffer a penalty.  If you look in the second IRS article under Penalty for Underpayment of Estimated Tax you will see this bit:

of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

This is called a safe-harbor payment.  You need to take your taxes paid from the prior year, quarter it, and that is your estimated tax payments for this year per quarter.  You should then consider any taxes you have already paid (if you have a regular W-2 job they take your taxes out per paycheck), and then next quarter pay what you need to for that quarter and any catchup.

 

Now, if you read all this and didn't find an urge to hire an accountant I would read it again.  I think I understand it pretty well...still have an accountant.

 

I purchased Turbo Tax for the Self-Employed and it works wonderfully well. (and the purchase price is a legitimate business expense)

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