Understanding Upwork and Taxes

Introduction

Welcome to Upwork! As a freelancer on Upwork, it’s important to understand how taxes operate. To begin with, Upwork doesn’t withhold taxes from your earnings. Being a freelancer, you’re considered a self-employed individual, which means you’re solely responsible for paying your taxes.

Income Reporting

Upwork reports your earnings to the IRS, given you meet certain criteria, but it’s your responsibility to report all income and calculate your taxes. Here’s an overview of the criteria:

• You’re a U.S. individual freelancer that earns more than $20,000 and had more than 200 transactions.
• You’re a U.S. company and earned more than $600.
• You’re a non-U.S. individual or company and had U.S. sourced income.

If you meet any of these criteria, expect to receive a tax form from Upwork which you’ll need to incorporate when filing your tax reports.

How to Report Your Income

Typically, you’ll need to use Schedule C of Form 1040 to report your income as a freelancer. You might be able to deduct certain expenses related to your work on Upwork, so consider getting help from a tax professional.

Understanding Form 1099-K and 1099-MISC

Form 1099-K and 1099-MISC are the tax forms used by the IRS to report payment transactions. Whether or not you’ll receive one of these forms from Upwork depends on how much you’ve earned and where you live, as detailed above.

Conclusion

In terms of taxes, you’re considered as an independent contractor while working on Upwork. It’s hence, crucial to recognize your role in reporting and paying your own taxes. Consulting a tax professional is always a wise idea to ensure you’re in compliance with any applicable laws.