Self-Employment Tax
Self-employment tax is the 15.3% Social Security + Medicare tax freelancers pay instead of splitting FICA with an employer. Definition, math, and how to reduce it.
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Schedule C
Schedule C is the IRS form where freelancers and sole proprietors report business income and expenses. Line-by-line overview, common mistakes, and how to reduce net profit.
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Quarterly Estimated Taxes
Quarterly estimated taxes are the four pay-as-you-go payments US freelancers send the IRS each year. Deadlines, safe-harbor rules, and the math per quarter.
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1099-NEC
Form 1099-NEC reports non-employee compensation to the IRS — what freelancers receive from each client that paid them $600+ in the year.
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Profit Per Project
Profit per project is revenue minus direct costs and allocated shared costs for a single income stream. The key metric for multi-stream freelancers.
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Profit Per Hour
Profit per hour is your net income divided by every hour worked — billed and unbilled. The real rate that reveals what you actually earn as a freelancer.
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MRR (Monthly Recurring Revenue)
MRR is the predictable monthly revenue from subscriptions and retainers — the core SaaS and creator metric for forecasting and business health.
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QBI Deduction
The Qualified Business Income deduction lets eligible freelancers deduct 20% of net business income from federal taxable income. Who qualifies and how much it saves.
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Shared Business Expenses
Shared business expenses are costs that serve more than one income stream — VPS, software, office rent. How to allocate them fairly across projects.
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Net Profit
Net profit is revenue minus all expenses — the bottom line of every P&L. For freelancers, it's the number that drives Schedule C, taxes, and operational decisions.
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Business Deduction
A business deduction is an expense that reduces taxable income. For freelancers, each qualifying deduction saves both income tax and self-employment tax.
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Accrual vs Cash Accounting
Accrual vs cash accounting: the two methods for recognizing income and expenses. Which one most freelancers use and when to switch.
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EIN (Employer Identification Number)
An EIN is the IRS-issued 9-digit business ID. Freelancers use it on W-9s to avoid sharing their SSN. Free to get, takes 5 minutes.
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Form W-9
Form W-9 is how a business collects your tax ID so they can issue 1099-NEC at year-end. What to fill in and when to provide one.
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S-Corp Election (Form 2553)
S-Corp election lets you split earnings into salary and distributions to reduce self-employment tax. Revenue thresholds and when it makes sense.
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Depreciation (Section 179)
Depreciation spreads equipment cost over its useful life for tax purposes. Section 179 lets you expense it all in year one — which is usually better.
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Home Office Deduction
The home office deduction lets freelancers deduct a portion of home costs when a space is used regularly and exclusively for business. Two methods explained.
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Business Mileage Deduction
Freelancers can deduct business miles at the IRS standard rate (currently 58.5¢/mile for 2024). A contemporaneous log is required.
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Form 1099-K
Form 1099-K reports payment-processor gross income. Freelancers receive it from Stripe, PayPal, Venmo Business, Etsy, etc. Gross — not net — so watch for double-counting.
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Gross Margin
Gross margin is revenue minus direct costs, divided by revenue. The metric that reveals how much of each dollar survives before overhead.
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Net Cash Flow
Net cash flow is the actual dollars flowing in and out of your business bank account, distinct from net profit. Why they can diverge.
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Sales Tax Nexus
Sales tax nexus is the connection a business has to a state that triggers a sales-tax-collection obligation. Post-Wayfair, economic nexus applies in most states.
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Form 1120-S
Form 1120-S is the annual tax return for S-Corps. Informational — the S-Corp doesn't pay federal tax; income passes through to owners via K-1.
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Form 8829 (Home Office Expenses)
Form 8829 calculates the home office deduction using the actual-expense method. When to use it vs the simplified method.
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Retained Earnings
Retained earnings are profits kept in the business instead of taken as distributions. Freelancers usually don't have much; S-Corps often do.
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Invoice Aging
Invoice aging is the report that shows how long unpaid invoices have been outstanding. The receivables health check for any freelancer.
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