Elance and Odesk are both websites that employers can use to connect with those who are looking for freelance work. Freelance work is similar to the work contractors do because both are given a fixed pay for work that is done within a timeframe. After that work has been completed, they are no longer connected to the company unless the company wishes to rehire them for another project. If you are looking to hire someone from either of these websites, there are some forms you will need to complete for the next taxable year.
The W-9 form will include all of the freelancer’s personal information including their Social Security Number, their Taxpayer Identification Number (TIN), and their full name. This is important for employers because it will help them get other forms started without having to continually ask the freelancer for more information.
A 1099-MISC form is filled out by an employer or a client that pays a freelancer for their work. The freelancer must earn $600 or more for the 1099-MISC form to be reported to the IRS. A new 1099-MISC form must be filled out for every new taxable year. If a freelancer has worked with a handful of different companies or clients in the past year, the company must fill out a separate 1099-MISC form for each project the freelancer was hired for.
Once a freelancer is able to gather all 1099-MISC forms for that year, they will be able to see how much they owe in taxes. As a company or client, keep any receipts or written agreements made with the freelancer so that it is easier to fill out the 1099-MISC form for that taxable year. This form will then be sent to the IRS and a copy should go to the freelancer so that you are both on the same page.
A 1040 form is used to report all income made through self-employment. A freelancer must also report any tax deductions so that they can determine the refund amount they will be receiving for that taxable year.
All income must be reported on a 1040 form unless it is tax-exempt, which can be figured out between you and your client. The amount of tax you owe should be calculated using the grid on the instruction page or if you file online, the tax owed will be done automatically. The 1040 form is the most basic version of this form, but depending on the type of work you do, you may need to fill out other forms in conjunction with the 1040 such as the 1040A, 1040EZ, or 1040NR.
Sites like wagefiling help freelancers by consolidating all reporting forms in one place and making it easy to fill them all out. Once the forms have been filled out, they can be sent to the IRS right away so that there is no chance of defaulting on your taxes. Wagefiling also lets freelancers keep all past documents in an organized place where they can be saved to your computer or printed out. These forms can be referenced later for future tax reporting, as well.