Independent Contractor Taxes

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,656 reviews

Jump to Section

Need help with a legal contract?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

How Are Independent Contractors Taxed?

Independent contractor taxes are based on the Internal Revenue Service’s self-employment tax rates. Therefore, businesses that hire self-employed contractors do not have to withhold taxes from wages.

If you earn $400 or more per year, you must file a Form 1040, Schedule SE, and Schedule C.

An independent contractor must also pay self-employment tax (SE) quarterly. These contribute to Social Security and Medicare. However, unlike employees whose employers hold taxes, contractors must use their taxes to cover these expenses.

You can report quarterly estimates on a Form 1040-ES, Estimated Tax for Individuals.

A freelancer can submit Form 1099-NEC and Form 1040, Schedule C, to the IRS at the end of the year. This will account for their total tax liability; it will also entitle them to any refund from estimated taxes they paid earlier in the year.

Businesses that hire contractors do not pay any taxes on their behalf, and they do not file taxes for them. Therefore, the freelancer must keep accurate financial records to file appropriately.

Who Is Considered an Independent Contractor?

An independent contractor, also known as a freelancer or 1099 contractor, is a person who performs work as their own business entity. They can be:

The IRS defines an independent contractor as a business or individual who performs services for other businesses. If a business hires someone and does not know if they are a contractor or employee, there are a few distinctions:

  • The contractor has freedom over where, how, and when they work.
  • The business only controls the result, not the method, of the work.
  • The business pays for a service only, not health insurance, social security contributions, or other benefits.
  • The contractor works independently, beyond any management or authority of the business.

Here is an article that explains the difference between an independent contractor vs. an employee in more detail.

Meet some lawyers on our platform

Namrita N.

13 projects on CC
View Profile

Christopher M.

7 projects on CC
View Profile

Benjamin W.

40 projects on CC
View Profile

Michael M.

2 projects on CC
View Profile

How to Calculate Independent Contractor Taxes

An independent contractor establishes their own payment schedule. Usually, this is on a weekly, biweekly, or monthly basis.

They must keep accurate financial records to file the appropriate tax documents for their quarterly estimates or annual income tax.

The timeline for quarterly freelancer or independent contractor taxes is as follows:

  • April 15th. Reports all income earned from January through March.
  • June 15th. Reports all income earned during April and May.
  • September 15th. Reports all income earned from June through August.
  • January 15th. Reports all income earned from September through December of the previous year.

State income taxes for freelancers will vary based on each individual’s location. However, they must be current on any deadlines or modifications to their respective states’ 1099 contractor tax reporting policies.

Do Independent Contractors Pay Their Own Taxes?

Independent contractors must file and pay their own taxes. No business is responsible for paying taxes on behalf of a freelancer, regardless of the duration of their working relationship.

An independent contractor’s income is not considered a salary as there are no additional deductions or withholdings from the business.

However, a business that enlists the services of a freelancer must send them a Form 1099-NEC at the end of the year to report all income paid during the previous calendar year.

If you earn $600 in a calendar year from any client, you have to claim the income, but they do not have to send you a 1099-NEC. However, suppose you are unsure how to invoice clients or file taxes correctly as a freelancer. In that case, employment lawyers specializing in contract law can help you.

Likewise, if you are a business owner planning to hire contractors, a lawyer can help you generate an independent contractor agreement. This document will protect both parties from litigation and set appropriate boundaries for the client-contractor relationship.

When Do Independent Contractors Need to Pay Taxes?

An independent contractor who expects to earn $1,000 or more in tax liability will have to file quarterly tax estimates. They must pay taxes by each quarterly due date, or they can face penalties when they file their total income at the end of the year.

Although you may have to submit estimates at the appropriate deadlines, all freelancers share the same tax deadline with W-2 employees: April 15th.

The quarterly tax payment deadlines are:

  • April 15th. Taxes are due for income earned between January 1st and March 31st.
  • June 15th. Taxes are due for income earned between April 1st and May 31st.
  • September 15th. Taxes are due for income earned between June 1st and August 31st.
  • January 15th. Taxes are due for income earned between September 1st and December 31st.

If you cannot make any quarterly tax payment, you can submit an IRS Form 2210 to waive the fee. You will have to explain why you could not make a payment and include proof, such as:

  • Bank statements
  • Evidence of disability, injury, or hospitalization
  • Retirement documents

The IRS will disperse any overpayments through a refund when you file your annual income.

If you cannot file your independent contractor taxes by April 15th, you can submit Form 4686 to request a six-month extension. However, it is important to note that this is only an extension to submit paperwork.

To avoid penalties, you must pay all taxes you owe to the IRS by April 15th.

Independent Contractor Taxes vs. Employee Taxes

There may be confusion for employers on an independent contractor vs. employee. However, the primary differences are how they perform the work rather than the result.

This example between a local contractor and a new employee can help illustrate the difference:

  • Sam is a content writer who offers blog writing services for local businesses.
  • A small bakery finds Sam’s website and requests that he write several blog posts for them.
  • Sam sets his own pricing, hours, and deadlines as a freelancer. He informs the bakery that the blog posts will be ready by the end of the month.
  • The bakery also hires a young woman to run its digital marketing strategy in-house. In addition, the bakery issues a W-2, withholds taxes from her paychecks, and offers job benefits, such as social security contributions and health insurance.
  • The employee has to report to the bakery Monday through Friday, 9 AM to 5 PM, work on approved platforms and use a work computer to complete her job.
  • Sam works on his own, and he submits the blog posts and an invoice at the end of the month.
  • The bakery approves of the blog posts, pays Sam, and ends their work relationship.
  • The employee that the bakery hired receives her tax document and files an annual income tax report with the IRS.
  • Sam files his 1099-NEC and Schedule C, along with other 1099s from additional clients.

The tax documents for contractors are different from those issued when hiring employees. For example, when hiring a contractor, the employer must provide a Form W-9 and, after services are finished, a Form 1099-NEC.

Form W-9 is a request for the freelancer’s taxpayer identification number (TIN) and their legal name. If they work as an LLC., they may provide their business name in place of their own.

The IRS suggests that businesses that work with contractors keep copies of W-9s for at least four years.

Independent contractor taxes are filed by individuals using Form 1099-NEC and Schedule C. You should have a Form 1099-NEC from every client you performed work for in the previous year.

If you earned less than $600 from a particular client, they are not required to send you a Form 1099-NEC. In this case, you can report the income on Form 1040, Schedule C. You should not exclude any earned income from this document.

Employer Taxes When Using Independent Contractors

Employers must give each freelancer they work with a Form 1099-NEC at the end of the calendar year. Form 1099-NEC reports how much a business pays non-employees, including self-employed contractors.

Getting Extra Tax Guidance

If you’re still unsure about creating the freelancer-employer working relationship, help is available. An experienced employment lawyer can answer all of your questions and help you draft independent contractor agreements, which are best suited for your situation.


Post a project in ContractsCounsel’s marketplace to get flat fee proposals from top-rated lawyers for your legal project. All lawyers in our marketplace are vetted by our team and peer-reviewed by our customers for you to explore before hiring.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

View Atilla
Member Since:
October 4, 2021

Atilla B.

Counsel
Free Consultation
Get Free Proposal
Denver, CO
3 Yrs Experience
Licensed in CO, DC
American University - Washington College of Law

Atilla Z. Baksay is a Colorado-based attorney practicing transactional and corporate law as well as securities regulation. Atilla represents clients in the negotiation and drafting of transactional (e.g. master service, purchase and sale, license, IP, and SaaS agreements) and corporate (e.g. restricted stock transfers, stock options plans, convertible notes/SAFE/SAFT agreements, bylaws/operating agreements, loan agreements, personal guarantees, and security agreements) contracts, in-house documents (e.g. employment policies, separation agreements, employment/independent contractor/consultant agreements, NDAs, brokerage relationship policies, and office policy memoranda), and digital policies (e.g. terms of service, privacy policies, CCPA notices, and GDPR notices). Atilla also reviews, and issues legal opinions concerning, the security status of digital currencies and assets. Following law school, Atilla practiced international trade law at the Executive Office of the President, Office of the United States Trade Representative, where his practice spanned economic sanctions enacted against goods originating in the People’s Republic of China valued at $500 billion. Afterwards, Atilla joined a Colorado law firm practicing civil litigation, where the majority of his practice comprised of construction defect suits. Today, Atilla's practice spans all corporate matters for clients in Colorado and the District of Columbia.

View Clara
Member Since:
October 8, 2021

Clara D.

Principal
Free Consultation
Get Free Proposal
Illinois
19 Yrs Experience
Licensed in IL
University of Chicago

After graduating from The University of Chicago Law School in 2002, Clara spent eight years in private practice representing clients in complex commercial real estate, merger and acquisition, branding, and other transactional matters. Clara then worked as in-house counsel to a large financial services company, handling intellectual property, vendor contracts, technology, privacy, cybersecurity, licensing, marketing, and otherwise supporting general operations. She opened her own practice in September of 2017 and represents hedge funds, financial services companies, and technology companies in a range of transactional matters.

View Gregory
Member Since:
October 18, 2021

Gregory B.

Attorney
Free Consultation
Get Free Proposal
San Diego, CA
3 Yrs Experience
Licensed in CA
University of San Diego

I love contracts - and especially technology-related contracts written in PLAIN ENGLISH! I've worked extensively with intellectual property contracts, and specifically with IT contracts (SaaS, Master Subscriptions Agreements, Terms of Service, Privacy Policies, License Agreements, etc.), and I have built my own technology solutions that help to quickly and thoroughly draft, review and customize complex contracts.

View Grant
Member Since:
October 11, 2021

Grant P.

Founder
Free Consultation
Get Free Proposal
New York
19 Yrs Experience
Licensed in FL, NJ, NY
Brooklyn

Founder and owner of Grant Phillips Law.. Practicing and licensed in NY, NJ & Fl with focus on small businesses across the country that are stuck in predatory commercial loans. The firm specializes in representing business owners with Merchant Cash Advances or Factoring Arrangments they can no longer afford. The firms clients include restaurants, truckers, contractors, for profit schools, doctors and corner supermarkets to name a few. GRANT PHILLIPS LAW, PLLC. is at the cutting edge of bringing affordable and expert legal representation on behalf of Merchants stuck with predatory loans or other financial instruments that drain the companies revenues. Grant Phillips Law will defend small businesses with Merchant Cash Advances they can no longer afford. Whether you have been sued, a UCC lien filed against your receivables or your bank account is levied or frozen, we have your back. See more at www.grantphillipslaw.com

View Jordan
Member Since:
October 13, 2021

Jordan M.

Partner
Free Consultation
Get Free Proposal
Houston, TX
3 Yrs Experience
Licensed in TX
University of Houston Law Center

I am a software developer turned lawyer with 7+ years of experience drafting, reviewing, and negotiating SaaS agreements, as well as other technology agreements. I am a partner at Freeman Lovell PLLC, where I lead commercial contracts practice group. I work with startups, growing companies, and the Fortune 500 to make sure your legal go-to-market strategy works for you.

View Jonathan
Member Since:
November 12, 2021

Jonathan K.

Principal
Free Consultation
Get Free Proposal
New York, Europe (Germany, UK)
13 Yrs Experience
Licensed in NY
Georgetown University Law Center

Pico & Kooker provides hands on legal advice in structuring, drafting, negotiating, interpreting, managing and enforcing complex high value commercial transactions. Adept at navigating complex environments, Jonathan has extensive expertise advising clients on a wide range of long- and medium-term cross border and financial engagements, including public tender participation, PPPs, export sales agreements as well as policy and regulatory formulation. Jonathan and his co-founder, Eva Pico have represented and acted on behalf of lenders, global corporations and other market participants across a range of industries including financial services, infrastructure and transportation. As outside counsel, Pico & Kooker, has developed a strong rapport and working relationship with their clients and appropriately work with their in-house teams to increase consistency, processes and procedures. The company employs a unique approach as practical, business minded outside legal counsel who believe in proactively partnering with their clients to achieve desired results while managing and engaging key stakeholders. They listen to their clients to develop customized solutions that best meet their needs while aligning with their objectives, vision and values. Some representative transactions include advising the World Bank on project finance and portfolio options to address the costs and risks associated with integrating renewable power sources. Also advising them as legal counsel, Jonathan developed policies, regulation and models for emerging market governments entering into public-private partnerships. In addition to his work with the World Bank, Jonathan has worked with some of the world’s largest consulting firms, financial institutions and governmental organizations, including the United Nations, the governments of the US, UK and select African countries. Through out his career, he has worked with large, multinational corporations both by consulting in-house and acting as outside counsel on large cross-border transactions. He graduated from Georgetown University’s law school and was admitted practice as a lawyer in New York, England and Wales and, as a foreign lawyer, in Germany. He has written several articles for trade journals and has been cited by several business publications in worldwide. Jonathan is a native English speaker and has high proficiency in German and a functional understanding of Spanish.

View Pelin
Member Since:
October 18, 2021

Pelin U.

Founding Attorney
Free Consultation
Get Free Proposal
Leander, TX
1 Yr Experience
Licensed in TX
Rutgers Law School - J.D. / Law

I am a solo practitioner and the founding attorney at Uzay Law, PLLC, which provides legal services in immigration and contracts. I am licensed to practice law in Texas. Prior to practicing law, I worked as a producer and film consultant in New York for over fifteen years. I am fluent in English and Turkish.

View Elbert
Member Since:
March 31, 2022

Elbert T.

Attorney
Free Consultation
Get Free Proposal
Oklahoma City
1 Yr Experience
Licensed in OK
Oklahoma City University School of Law

Elbert Thomas is the founder of the Thomas Law Group, LLC. Elbert is proficient in contract creation, drafting, reviewing, and negotiating various business contracts and demand letters in industries such as construction, personal, professional services, non-profits, and real estate. In addition, Elbert is also experienced in start-ups, small business formation, drafting operating agreements, and estate planning.

View Tabetha
Member Since:
October 26, 2021

Tabetha H.

Attorney at Law
Free Consultation
Get Free Proposal
San Jose, CA
24 Yrs Experience
Licensed in CA
UCLA

I am a startup veteran with a demonstrated history of execution with companies from formation through growth stage and acquisition. A collaborative and data-driven manager, I love to build and lead successful teams, and enjoy working full-stack across all aspects of the business.

View Reuben
Member Since:
October 21, 2021

Reuben O.

Senior Managing Attorney
Free Consultation
Get Free Proposal
Seattle/Boise
13 Yrs Experience
Licensed in ID, WA
The University of Iowa

As an entrepreneur at heart, I enjoy working with business owners and executives on a variety of corporate matters, including mergers and acquisitions, corporate financing, corporate governance, public and private securities offerings, privacy regulation and early-stage corporate matters including formation. As a lawyer and business professional, I understand the value of providing personal service and focused legal answers to clients navigating a rapidly changing regulatory environment. Whether in Aerospace, Consumer Goods, or Technology, I find great success in work collaboratively with clients to strategical structure their business or implementing strategic growth-oriented financing opportunities.

View Thaddeus
Member Since:
October 22, 2021

Thaddeus W.

Principal
Free Consultation
Get Free Proposal
Los Angeles, Ventura County, New York City
25 Yrs Experience
Licensed in CA, NY
University of Notre Dame Law School

Experienced legal counsel to entrepreneurs, small businesses, and investors. Advising clients starting, buying, selling, operating, financing, and investing in businesses // U.S. Army Veteran // Dog Lover // Ironman Triathlete, Marathoner, Open Water Swimmer, USAT Triathlon Coach // Oenophile

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call