Freelance Business Income, Explained
A healthy income is vital to growing and thriving as a freelancer. This guide explores the most important aspects of your freelance revenue, from invoicing and management, through bookkeeping and tracking, to reporting income and understanding taxes.
Your freelance revenue, or income, is the money that you bring into your business through providing services to clients. The two main ways that freelancers earn income are from invoicing clients directly, or by delivering projects through freelance platforms.
Freelancers use business income for three main purposes: to pay themselves, to pay for business expenses, and to pay taxes. It’s important to track your income closely, so that you can understand your financial position, be paid for work you’ve completed, and have enough money available to meet your commitments.
You will also need to track your income for tax purposes, as you will pay self-employment and income tax on your business profits, which are calculated by deducting your expenses from your revenue. This guide explores many aspects of freelance income, including where it comes from, how to track and manage it, what it means for your taxes, common challenges, and best practices.
Key takeaways
Freelance revenue is the total amount that you bring into your business through providing freelance services. This income can come from multiple sources.
You will use your income to meet your living expenses, save for the future, keep your business running, and pay taxes.
Good income management and bookkeeping means you will get paid on time, receive the money you’re owed, understand the health of your business, and meet your tax liabilities.
Understand your revenue to improve the way you invoice clients, keep your business running smoothly, and report your income properly on your tax returns.
Read on to find out everything you need to know about your freelance business income.
What I will cover in this guide to freelance income
This is a very in-depth guide! You’ll find helpful information on several freelance revenue areas, including:
The basics of freelance income.
How to properly manage your freelance income.
How staying on top of your income improves relationships with your clients, your vendors, and the IRS.
Common obstacles and challenges relating to your freelance revenue.
Important forms and documents for managing income.
What your freelance revenue means for paying taxes and filing tax returns.
Best practices for understanding and staying on top of your revenue.
Before we start, a couple of quick notes.
Firstly, when we talk about “freelance business income,” in technical terms we’re describing your “gross business income.” It can also be called your freelance business revenue, turnover, or sales. We’ll use the terms “revenue” and “income” interchangeably in this guide to refer to your “gross business income.”
Secondly, please note that the information in this guide only applies to US-based freelancers, and that I am not an accountant or tax professional. This guide is intended as general information only, and you should always talk to a qualified professional about your unique circumstances. Please see the notice at the end of this guide for more information.
Alright, let’s get into it.
Freelancers often have diversified income sources. For example, as a freelance writer I earn money through directly completing work for individual clients, from working through marketing agencies, and via the Fiverr Pro freelance platform. I also earn a little extra from publishing on Medium and similar channels. I count all of these as part of my freelance business income.
The basics of understanding your freelance income
Discover the most important concepts to understand the revenue coming into your freelance business.
What are the main sources of freelance revenue?
It’s likely that you will have multiple ways of bringing money into your freelance business. Some of the most common sources for your income might be:
Invoicing the fees that you’ve charged to clients for specific pieces of work.
Payments that you’ve received from freelancing platforms like Fiverr, Upwork, and similar.
Charges to clients for areas like project management or consulting.
Money you’ve made from selling your own or others’ physical or digital products, either directly or via affiliate marketing.
Money you’ve made from monetizing your videos, website, or other creative content through advertising, subscriptions, profit sharing, or other means.
Any other payments for freelance work and related activities.
All of these sales and payments count as part of your freelance income.
Who are the main parties involved with earning freelance income?
There will always be at least two parties involved in you earning money as a freelancer:
You, the freelancer, who charges for the products and services you provide.
Your client, who is the one paying you for your work.
Depending on how you do your work and how you charge for it, there may be other parties involved as well. These might include:
A freelance platform like Fiverr or Upwork. You provide work through the platform, the client pays the platform directly, and then the platform pays you.
A credit card payment processor that lets a client pay by debit or credit card, then deducts their fees before passing the rest of the income on to you. Popular processors include Stripe and PayPal.
If you make money through affiliate marketing or advertising, then those networks and parties will also be involved in providing you with your freelance income.
When do freelancers get their income?
You will normally earn your money when you complete work and then request payment—most often by sending an invoice to your client or marking work as complete on a freelance platform. In most cases, it will be up to you to request payment. The speed with which you will get paid will depend on various areas, including:
Payment terms on your invoices.
The conditions in your contract.
Acceptance of work by the client.
How quickly a freelance platform releases payments to you.
Some freelancers request prepayment before starting on projects, especially if they’re working with a new client. Once a client has paid your invoice, you can normally access the funds within a few days. A card processor might transfer the funds into your bank account directly, while you may have to pay a check into your bank account and wait for it to clear.
If you earn money through other means like affiliate marketing or selling your own products, then payment speeds for that income can vary widely, depending on lots of different factors.
Why is it important to stay on top of my freelance revenue?
There are three main areas where you’ll need a healthy income to meet your personal, business, and tax requirements:
Paying yourself, so you have enough money to live, thrive, and save.
Paying expenses, so you can afford to run your business.
Paying taxes, so you can settle what you owe to the government.
Paying yourself
The money you pay yourself as a freelancer comes directly from your clients. If you want to have enough money to meet your personal expenses, household needs, and future plans, then it’s vital to have cash flowing into your bank account.
Paying expenses
You’ll also deduct your freelance business expenses from your income, so you need that money to cover areas like payment processing fees, website hosting, health insurance premiums, marketing costs, software subscriptions, and similar. Here’s a helpful guide to some of the most common freelance business expenses.
Paying taxes
You need to pay taxes on your freelance profit, and those profits are equal to your income less your expenses. You’ll normally pay those taxes four times a year as estimated taxes, and settle any other outstanding taxes when you send in your tax return. This means it's important to have enough available income when those taxes are due.
How to manage your freelance income
Explore the main ways you can understand and track your freelance revenue.
What’s the process for earning freelance income?
The exact methods you use to earn money will vary depending on how you do business, but here’s how it might work for a freelancer invoicing a client directly:
A client approaches you requesting work.
You figure out how much work is involved and quote them a price.
The client decided to go ahead, at this point you might send them an invoice for prepayment.
You do the work and it’s accepted by the client.
You raise an invoice for any outstanding amount owed.
You send the invoice to the client, and they pay using a payment option like a credit card or bank transfer.
The money gets transferred into your business bank account or your personal account.
You show the invoice and the payment in your bookkeeping system.
This process can vary widely, so try different approaches to figure out what works for your business and cash flow.
Although I earn income from multiple sources, I track it all as invoices for simplicity. So, if I receive a payment from Fiverr Pro, I will "raise an invoice" to the Fiverr Pro platform for that amount, and "Mark it as sent" without actually sending it to the platform. Then, when I claim my payment from the platform, I simply reconcile it against that invoice. You can experiment with different options to see what works best for you.
How do I track my income in my bookkeeping software?
It’s important to record all of your freelance revenue, wherever it comes from. You can do this using your freelance bookkeeping system. There are various ways to show your revenue, depending on what your bookkeeping software allows:
Record it as a general sale
Record it as a category of sale
Record it on an invoice
When you raise an invoice in your software, you can send it to a client. When the client has paid, you’ll see a payment transaction in your bank account. You then assign that payment to the invoice.
If you record sales directly, you just mark a transaction as sales income when it arrives in your bank account. Make sure that you record income from all sources as you’ll need that information when you’re completing your tax return. You can look at the Profit and Loss (P&L) report in your bookkeeping software to understand your total income over a particular time period.
An example of invoices in a bookkeeping system
If I don’t have bookkeeping software, how do I track my income?
If you don’t want the expense or overhead of using bookkeeping software, then you will need to keep a running total of your invoices and earnings. In that case, you might want to setup a simple spreadsheet with client name, invoice number, date sent, date due, date paid, amount owed, etc. You can then use that total for your freelance income at the end of the year.
Do I need a separate business bank account to receive my freelance income?
You are only legally required to have a separate bank account for your business if you formed your business as a Limited Liability Company (LLC) or a corporation. In those cases, you must always have a separate bank account purely dedicated to your business transactions. You would receive income into that account, make expense payments from it, and use the money in that account to pay yourself.
Even though you do not strictly need a separate business bank account if you’re a sole proprietor or a partnership, it’s often a very good idea. It helps to keep your finances separate, which makes it much easier to understand your freelance income, reconcile your bank account, complete your bookkeeping, and work out how much tax you will owe.
How does my freelance income work with my bank account?
It’s often a very good idea to have a business bank account dedicated to the money coming into and going out of your business. As you receive invoice payments into your bank account, you’ll use your bookkeeping software to “reconcile” those transactions against your invoices. This helps you understand when invoices are paid and when you’ll have money in your bank account to pay yourself, your expenses, and your taxes.
How do I ensure that I track my freelance revenue correctly?
Review your invoices, earnings, bank transactions, payments, and reports on a regular basis. Go through each of them to ensure that everything adds up. That way, you’ll be confident of your figures when it comes to completing your tax return. You will also want to compare the total amount you invoice or receive as payments against the total amount your clients say they have paid you on 1099-NEC forms. More on those later.
Do I need to receive my freelance income in US dollars?
While you do not need to receive your income in US dollars, you do need to complete your tax return using the equivalent US dollar amount when you received the payment. For that reason, it’s often easiest to request payments in US dollars so you can avoid complications involved with international exchange rates later on.
If you do receive payments in other currencies, you may need to convert them before paying them into your US bank account. For tax purposes, you would use the prevailing US dollar exchange rate when you receive the payment and record those figures in USD for your tax return and tax calculations.
Should I categorize my freelance revenue in certain ways?
Bookkeeping software will often allow you to add categories to your freelance income and expenses. If you do freelance work across a variety of niches or services, then it can be helpful to categorize your income to track your success in each. For example, as a freelance writer I have separate categories for money I have earned through creating blog posts, white papers, or consulting. It’s a good idea to add categories if doing so helps you understand, control, and maximize your income from certain areas.
An example of categorizing freelance income in a P&L report
How do I report freelance income for tax purposes?
The way that you report your freelance income for tax will differ slightly, depending on how your business is classed. For sole proprietors (the default business type) and single-member LLCs, you’ll show your income on your Form 1040 Schedule C. Partnerships and multi-member LLCs will show it on a Form 1065, and S Corporations will show it on a Form 1120-S. You may also need to show your overall income on tax returns for your state. Remember that your tax will be assessed on your freelance profits, not your freelance revenue.
Provided you stay up to date with your bookkeeping, you should be able to get these figures from the P&L report in your bookkeeping software. We’ll have more information on freelance income and taxes later in this guide.
How does managing my freelance income save me time, effort, and hassle?
The main advantages of managing your freelance income are that you will:
Be paid what you’re owed, according to what you’ve agreed with your clients.
Get paid promptly and on time, lessening your need to chase down late payments.
Have confidence that you’re earning enough to meet all of your commitments.
Understand roughly how much tax you might need to pay, depending on your sales and expenses.
Generate enough free cash flow to pay suppliers, vendors, and tax agencies.
Report accurate figures for calculating estimated and end-of-year taxes.
Improving relationships through managing freelance income
Find out how staying on top of your income can help you work better with clients, suppliers, and the IRS.
How does managing my freelance revenue affect my relationships with clients?
Your clients expect to pay you according to the amount, payment method, and payment timescales that you’ve agreed with them. It’s important to present a professional approach by invoicing fairly and accurately, recording payments, and chasing overdue amounts. Satisfied clients will be happy to pay your invoices, and getting paid properly and promptly will encourage you to keep working with those clients.
How does managing my freelance income affect my relationships with vendors and suppliers?
Vendors and suppliers are the organizations that provide products and services to your freelance business. That might be a web hosting provider for your portfolio website, the software vendor that needs a subscription for your bookkeeping tool, or the broadband provider that gets you online. In each case, you need to pay those bills to use those services—and you rely on your income to cover those costs. Paying your bills promptly means you won’t have any business interruptions, which makes it smoother and easier to provide freelance services.
How does managing my freelance cash flow affect my relationships with the IRS and my state’s Department of Revenue?
You can’t avoid taxes, and agencies like the IRS and your state government expect you to pay your fair share on time. If you don’t, you’re likely to pay interest and possibly other penalties. This means you’ll need enough free cash to cover your self-employment taxes and income taxes that are due to the IRS and your state.
Your US-based clients are also required to report how much they have paid you to the IRS, using Form 1099-NEC, and if you accept credit cards those payments will also be associated with your freelance business. Accurately declaring your income, expenses, and profits means you’ll pay the correct amount in taxes.
It’s important to note that taxes are due on your profits, not your gross income (revenue), but that you will still need enough spare cash to pay those taxes regularly.
Overcoming challenges and obstacles
Learn about some of the biggest challenges freelancers face when it comes to their revenue.
What are the challenges related to managing freelance income?
Besides not getting paid enough, many freelancers do have other issues with managing their freelance income. Here are some of the main challenges and how to overcome them.
Not getting clients to prepay for work
If you’re working with a client for the first time, it’s often a good idea to get them to pay for your services before you provide them. While most clients are trustworthy, it’s always possible that a client might try to avoid paying you. You might request payment of the full amount before starting, or half upfront and half on completion.
Not agreeing amounts prior to invoicing
Clients hate surprises, especially if you’re not charging what they expect. Always get written agreement on how much you’re going to charge and ensure they understand what all of your fees are and what might cause them to change.
You would be surprised (or maybe not!) at the number of freelancers who simply forget to invoice their clients. I always capture each piece of work as I complete it and send out invoices at the end of the month. This helps to maintain a healthy cash flow.
Forgetting to invoice for completed work
You’d be surprised how often freelancers fail or forget to invoice for work they’ve completed. As soon as you finish a delivery, a milestone, or a certain amount of work, always capture it so you can invoice properly. Don’t rely on your memory! Make a note of how much you’re going to charge for the work you’ve completed.
Not invoicing on time
Always send out invoices according to your agreement with your client. If you say you’ll invoice on delivery of your work, then send out your invoice once the client has received the deliverable. If you invoice at the end of the month, then set a reminder to send out invoices on the last working day of the month. Invoicing promptly is one of the best ways to stay on top of your cash flow and ensure you regularly have money coming into your freelance business.
Not reconciling your bank account
Reconcile your bank account with your bookkeeping software on a regular basis, at least every month and preferably every couple of weeks. This helps you understand when invoices have been paid and how much free cash flow you have available.
Not chasing up late invoices
Occasionally, clients forget to pay. It doesn’t mean that they don’t want to pay, it’s that sometimes, delays happen. In those cases, it’s important to send out payment reminders, so you get paid as quickly as possible. That will often mean checking and reconciling your bank account, payments, and invoices on a regular basis, and sending out invoice reminders if they go beyond their due dates.
Not understanding payment or platform fees
Some expenses will be deducted from payments even before the money arrives in your bank account. For example, credit card processors typically deduct around three percent of the total amount of a payment to cover their fees. So, that payment of $200 instead becomes a payment of $196. That might not be a huge amount by itself, but those costs add up over time.
One other area that can reduce your income substantially is the fees from freelance platforms. For example, Fiverr takes a 20 percent cut of order amounts, and UpWork also applies service fees of up to 20 percent. That can make a big difference to your expected earnings, so it’s important to read the fine print so you know exactly how much you’ll earn.
Not having enough income to meet tax or expense requirements
One of the main issues for freelances is good cash flow management. This means having enough money in your bank account to meet all of your commitments—whether that’s paying yourself, your expenses, or the taxman. Always keep a cash buffer in your bank account so that you have enough put aside to meet upcoming bills, in particular, pay attention to estimated tax payment dates—this is where you need to pay taxes on the profits you’ve earned in the previous quarter.
Estimated tax payment dates fall in mid-April, mid-June, mid-September, and mid-January. On those dates, you’ll owe money to both the IRS and your state’s Department of Revenue.
Misreporting your freelance income for tax purposes
It’s important that you accurately report your freelance income, expenses, and profits to ensure that you’re properly assessed for taxes and pay what you owe. The IRS uses the amounts that you report on your tax returns and checks those amounts against reporting from your clients and others to ensure you’re reporting the correct amounts.
If the IRS finds a discrepancy in these amounts, it can request more information from you and assess additional taxes, interest, and penalties. If you inadvertently report an incorrect amount, you will need to file an amended tax return.
Important forms and documents for freelance income
Discover the most important forms, reports, and documents for tracking and understanding your revenue.
What forms, documents, and reports are important for managing my freelance income?
There are several vital reports, documents, and forms that you’ll need to understand your freelance revenue, these are:
Invoices: Individual documents that you send to clients to request payment for services.
Freelance platform earnings statements: Notifications and statements that you receive from freelance platforms like Fiverr or Upwork that tell you how much you’ve earned from your work.
Bank account statements: Statements from your business or personal bank accounts that show where you’ve received payments, so that you can reconcile those transactions against the relevant invoices.
Profit and Loss (P&L) reports: These are reports generated from your bookkeeping software that will show your total income and also break that income down if you categorize it.
Late invoice reports: These are reports generated by your bookkeeping software that show overdue invoices that haven’t been paid.
There are also several important tax reports and forms related to your freelance income. We’ll cover those in detail below, but in brief they are:
Federal and state tax returns: This is where you will report your freelance income. These do vary between personal and business tax returns.
Form W9: A form that you send to a client so that they can properly report what they have paid you to the IRS.
1099-NEC: A form that your clients will send to you and the IRS declaring how much they have paid you.
1099-K: A form that a credit card processor will send to the IRS showing the total amount of payments that you have received through their systems.
How do I use these documents and forms to manage my freelance revenue?
Here’s a brief overview of when and how you would use each of these documents.
Invoices
Generate invoices from your bookkeeping software.
Record the services you provide to a client together with the cost of those services.
Send invoices out on a schedule as agreed with your client.
Track invoice payments on a regular basis and reconcile them to mark invoices as paid.
Keep a record of invoices in case you need them for tax or auditing purposes.
Freelance platform earnings statements
Provide work via freelance platforms.
Arrange to charge clients and get paid through those platforms.
Track your earnings as work is completed.
Transfer payments from the freelance platform to your bank account.
Report those earnings in your bookkeeping system.
Keep a record of earnings statements in case you need them for tax or auditing purposes.
An example of a freelance earnings statement from Fiverr
Bank account statements
Get statements from the financial institution where you hold your business bank account.
Import those transactions into your bookkeeping software.
Regularly reconcile the payments you’ve received against your invoices.
Mark the relevant invoices as paid.
Keep a record of bank account statements in case you need them for tax or auditing purposes.
P&L reports
Understand that P&L reports are updated as you receive income and spend money in your freelance business.
Categorize invoices, payments, and expenses so that you can track everything in your P&L reports.
Run P&L reports on a regular basis so that you understand how much you’re earning and where it’s coming from.
Use information from your P&L reports when calculating estimated taxes and filing your tax returns.
Keep a record of P&L figures in case you need them for tax or auditing purposes.
Late invoice reports
Reconcile your bank accounts regularly, so you can understand/ what invoices have been paid and what haven’t.
Run a late invoice report to see what clients are late in paying their invoices.
Send reminders to request payment of overdue invoices.
It’s important to keep receipts and documentation in case you need to back up your tax returns or other information.
One of the most vital things to remember about your freelance taxes is that you pay taxes on your profits, not your income. Your profits are equal to your income less your expenses.
Taxes and freelance income
Learn how your freelance income affects your taxes and how to report your revenue to the IRS.
Do I pay tax on my freelance income?
Freelancers generally pay taxes on their profits, rather than their gross income. Your profits are your gross income (revenue) less your expenses. This means you won’t typically pay taxes on your income itself. Instead, you’ll deduct your expenses and pay tax on the remainder. The higher your expenses, and the lower your income, the lower your freelance profits—and the tax you will pay on those profits.
There are two types of federal taxes that all freelancers will need to pay on their profits:
Self-employment tax
Federal income tax
If your state charges income tax, you will also need to pay state income tax on your profits.
How much of my income should I put aside for paying taxes?
You pay tax on your profits, not your income—but as a reasonable rule of thumb, put aside around a 25 to 30 percent of your freelance income for the various taxes you will need to pay.
Do I need to pay sales and use tax on my freelance income?
Most states, counties, and cities do not charge sales and use tax on services—and since freelance work is generally considered a service, this means freelancers don’t normally need to pay sales tax. But, there are exceptions. Some states and cities do charge sales and use tax on freelance sales. Always check with your state’s Department of Revenue to see what their rules are, and get a sales tax license and pay those taxes if it’s required.
Can I charge sales tax on my freelance income or invoices?
Generally, no. You would only charge sales tax if you are required to pay sales tax, and most states do not require sales tax on freelance services. But, it’s important to check with your state as if you do need to pay sales tax, you should add it to your invoices.
How does estimated tax work for freelance income?
The IRS, and typically your state, will require you to make estimated tax payments four times a year. When estimated taxes are due, you will pay self-employment tax, federal income tax, and state income tax due on the profits you earned in the previous quarter. Estimated tax payments are due on the following dates each year:
April 15 for Q1 of the current year
June 15 for Q2 of the current year
September 15 for Q3 of the current year
January 15 for Q4 of the previous year
This means you should have enough freelance income in your bank account to pay these estimated taxes on these dates. Not paying estimated taxes by their due dates can mean you pay interest on unpaid tax and mean you have to pay more when you file your end-of-year taxes.
How do local and franchise taxes work for freelance income?
Your city, county, or state may charge additional taxes for businesses. Typically, these charges are either fixed fees, or based on your overall income. Check with your local and state agencies to learn about any taxes you will need to pay.
How is my freelance income reported to the IRS for tax purposes?
There are two main ways that the IRS learns about your overall freelance income:
What you self-report as your overall freelance income when you file your end-of-year tax return.
What your US clients and payment processors report to the IRS about what they have paid you.
How do I self-report my freelance income to the IRS?
You report your overall business income by including that amount on your tax return. You can find out the overall amount from your P&L report in your bookkeeping software, then you enter that into the relevant boxes on the forms you file with the IRS.
If you do not use bookkeeping software or have a P&L report, then you will need to add up all of the income you received from freelancing. That might include invoice amounts, payments from freelance platforms, and any other sources of freelance revenue. It’s important to account for all of your freelance income and enter that amount.
You will enter your total income in various tax forms depending on the legal type of business that you run:
For sole proprietors and single-member LLCs, you will enter your total income on your Form 1040 Schedule C.
For a partnership or multi-member LLC, you will report your income on a Form 1065.
For an S Corporation, you will report income on a Form 1120-S.
Your freelance income is often described as your “Gross Income” or “Receipts” on these tax forms.
You may also need to enter your overall freelance income on your state tax return. These details do vary between states.
How else is my freelance income reported to the IRS?
The IRS doesn’t just rely on self-reporting to understand your overall freelance income and taxes. Any US-based client that pays you $600 or more in a year is also required to report what they paid you, using a Form 1099-NEC (non-employee compensation).
Form 1099-NEC and reporting income
When you start working with a US client, you will need to provide them with a Form W9 that gives them certain entails about your business. That client then uses information from the W9 to create a 1099-NEC and sends it to the IRS at the end of each tax year. You will also receive a copy of each 1099-NEC. The 1099-NEC contains information including:
Your business name and address
Your Tax Identification Number, either your Social Security Number or your Employer Identification Number.
The legal status of your business.
The name and tax identification number of the client that has paid you money.
How much they have paid you in total.
Form 1099-K and reporting income
Additionally, if you receive payments through a payment processor, they will also report on the total amount of money you’ve received in income via their services. They report this to the IRS on a Form 1099-K at the end of the year. You will also receive a copy of each 1099-K. What this means is that the IRS has a good idea about the income you have earned, as reported to them via these 1099 forms. When you self-report your freelance income, it’s important to declare everything you have earned, whether it would have been reported on a 1099 or not.
The IRS will compare the total you have self-reported against the amounts shown on the 1099 forms and if it finds you have misreported your income, it may require further information or an audit. If it discovers that you underreported or owe more tax, you may be faced with extra interest and penalties.
How can I stay compliant with the IRS when reporting my freelance income?
The best way to stay compliant is to make sure you do your bookkeeping regularly, gather together all of your 1099 forms, and accurately report what you made in the year from all sources. The IRS will also compare your total freelance income to your expenses and profits to ensure everything “looks right,” as they have a lot of data on income, expense ratios, profits, and other areas.
Essentially, as long as you report accurately and have documents, invoices, and receipts to back up your claims, you shouldn’t run into any issues. It’s also important to note that taxes can be complex. If you’re just starting out as a freelancer or don’t have very much income, you may well be able to self-report your taxes using software like TurboTax. But, as you start earning more and your tax situation becomes more complex, it’s definitely worth hiring an accountant to help you understand your taxes and file correctly.
Best practices for effectively managing freelance income
Let’s finish with a summary of some best practices you can follow to manage and stay on top of your freelance business income:
Record all of your business income in one place, no matter where it comes from.
Invest in bookkeeping software to help you track and manage your income and expenses.
Agree prices and rates for freelance work with clients before you invoice them, so there are no surprises.
Invoice promptly and regularly for all the work you’ve completed and follow up with clients on late payments.
Get upfront payment or deposits the first few times that you work with a new client.
Understand the fees that might be taken out of your freelance income by payment providers or freelance platforms.
Open up a separate business bank account to make it easier to track money coming into your business.
Reconcile your bank account and payments regularly to stay on top of your income.
Regularly review your bookkeeping and Profit and Loss reports to understand and stay on top of your income.
Put aside at least 25 to 30 percent of your income for tax purposes.
Keep enough spare money and cash flow in your bank account, especially for paying expenses and estimated taxes.
Report all of your freelance income for tax purposes, and remember that clients and payment providers will also be providing payment amounts to the IRS.
See our freelance guides on related topics
Accounting and Bookkeeping: Accounting, taxes, and bookkeeping for freelancers.
Revenue and Income: Understanding the revenue that’s coming into your business, bookkeeping, and similar topics.
I am not a qualified professional and I do not provide tax, legal, accounting, or similar advice. These guides are provided for informational purposes only. Always consult with a qualified professional on your unique circumstances. You can find more information in my disclaimer.
By Paul Maplesden