The best tax software for freelancers and self-employed filers in 2023

Freelancing isn’t just about sweatpants and snooze buttons.

Well, sometimes it is. But most of the time, it’s cabin fever, caffeine cravings, capricious cash flow, and fierce competition for customers.

In summary, being your own boss is really hard work. And no time is that more evident than during tax season.

Freelancers, independent contractors, and other self-employed people face a unique set of challenges when it comes to filing annual returns, compared to those with a typical 9-to-5 job. doing. For one thing, you need to keep business records separate from your personal records throughout the year to make sure you’re in order once tax season begins. They are also responsible for creating and tracking tax estimates.(opens in new window)(opens in new tab) This is because it is not automatically deducted from your salary every quarter for the whole year.

Perhaps most frustratingly, instead of getting your tax refund like the 9-5 crowd, you’re actually getting your tax refund for the year in case your expected payout is less than you need. This means that you may need to pay extra money to cover the (You may be punished for(opens in new window)(opens in new tab) If you neglect to pay them in full.)

Oh, and don’t forget the whopping 15.3% federal self-employment tax.(opens in new window)(opens in new tab) You must pay if you have earned at least $400(opens in new window)(opens in new tab) from your freelance work. Sure, it goes cool Social Security and Medicare for you in the future — maybe maybe?(opens in new window) — but not so much fun for you in the present.

If your head isn’t already swirling with all the tax talk, consider the fact that QuickBooks. Research(opens in new window) 500 freelancers found that one of the toughest challenges facing the modern self-employed is paying their own taxes. It’s an uncomfortable and tedious ordeal — in fact, so uncomfortable and tedious that over a third of freelancers don’t even care about paying taxes, according to the same poll.

Tax evasion is a felony, so it’s in your best interest to file a return each year. Trying to figure everything out on your own can cost you hefty fines and interest if you make any mistakes. , the fees could also leave a hole in your pocket.

Consider purchasing tax software as a satisfying medium between the two.

What is tax software?

Tax software is a type of software program designed to guide users through the process of preparing and filing returns, helping them to comply with tax laws while identifying available deductions and deductions. Essentially, it’s software that relieves you from paying your own taxes.

In the past, tax software came in the form of CD-ROMs that you could download to your desktop computer. (How retro.) These days, all you have to do is download the program from his website at a reputable tax preparation company. Or, even better, some tax preparation tools are available entirely online or via mobile apps for maximum convenience.

What should I look for in a tax software program?

“Freelancer” is synonymous with “self-employed person” in the eyes of the IRS (specifically, “sole proprietorship”).(opens in new window)(opens in new tab)“), you will report business income and expenses on Schedule C.(opens in new window)(opens in new tab) and Schedule SE self-employed tax(opens in new window)(opens in new tab); Include both on Form 1040(opens in new window)(opens in new tab), is a standard individual tax return. The tax software you use must support Form 1099-NEC and its paperwork.(opens in new window)(opens in new tab), a non-employee income certificate obtained from a client in lieu of a W-2.You may also receive Form 1099-K(opens in new window)(opens in new tab) When a client pays $600 or more from a third-party payment network such as Venmo or PayPal.

Other useful features are:

• Intuitive e-filing process with simple questions and prompts

• Some kind of accuracy and maximum refund guarantee

• Robust customer support with optional access to real-world tax experts in emergencies

Remember, you must also file state taxes in addition to federal taxes (unless you don’t collect income tax)(opens in new window)(opens in new tab) — see Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming). Some tax software providers include one state for free, but most charge a fee for each state in which filing is required.

Also, keep in mind that the cheapest tax software option is not necessarily the best tax software option. The program you choose should be robust enough to handle complex tax situations, sniff out a ton of possible deductions, and promise a high degree of protection in case you get audited. , Now is not the time to be stingy. You don’t just want your taxes handled, you want them handled right. I’m not saying you should pay for features you don’t need, but make sure your bases are covered.

What can freelancers deduct for taxes?

Speaking of deductions, one of the big things freelancers do for them during tax season is the fact that they can write off far more work-related expenses than the average employee. This includes office supplies, internet charges, meals, education, mileage and health. Insurance premiums, and part of the rent that covers your home office. But don’t be too brazen. These expenses should be “normal and necessary” for your business, according to the IRS.(opens in new window)(So, for example, you can’t write off road trips just for fun.)

Is it worth having a tax accountant pay my taxes?

If your tax situation is very simple, if you’ve already filed as a freelancer for several years, and/or if you make less than $73,000 a year, the IRS’s free file program(opens in new window)(opens in new tab)However, most freelancers have complex tax situations that require a paid software solution with built-in premium features and support from seasoned tax professionals. The budget is about $105 for federal returns and about $50 for each state return.

This means you probably don’t need to splurge on a real, real CPA, but it’s always an option if you’re not confident about applying for it yourself.According to a study by the National Institute of Accountants(opens in new window)a typical US company charges an average of $343 for itemized goods.(opens in new window)(opens in new tab) $220 for Form 1040 with State Returns, Form 1040 without Lines with State Returns, plus $192 for Schedule C and $41 for Schedule SE. Most are charged for 1099 seconds ($67.72 average) and also for unorganized or incomplete files ($165.82 average).

What is the best tax software for freelancers?

Recommended software options for Schedule C, Schedule SE, Form 1099-NEC, and Form 1099-K for the 2023 tax season include: (Note: The following are all online products launched in Fall 2022.)