Posted on: February 10, 2015 by Renato Cachina
With tax season upon us, your clients in various professions are examining their finances, ensuring they are prepared and getting all of their paperwork together. Freelancers, or entrepreneurs, are no exception. In fact, estimating taxes can be an even more difficult task for freelancers than it is for traditional employees, who have a steady income, and know to expect a W-2 by January 31st. In addition, traditional employees may be covered by their employer’s Professional Liability Insurance Policy, whereas freelancers need to ensure they have appropriate coverage to protect their assets.
As a freelancer, your client will receive an IRS Form 1099. They could even receive numerous 1099’s, depending on how many clients and/or projects they worked on over the past year. Most forms arrive in January; however some companies issue the forms throughout the year when they issue checks.
Many freelancers become concerned if they are supposed to receive a 1099 but do not. The IRS recommends asking your employer or project manager if you don’t receive the form by the end of January, especially if it’s a form 1099-R. However, contributing Forbes.com writer Robert W. Wood suggests that most other 1099 forms should not be asked about.
Your clients should of course report their income, but if the IRS already has record of income and they request their 1099, the IRS computer may end up thinking that they had twice the income they actually did.
Just as employers should invest in a tax professional at the end of the year, your freelancer clients should as well.
At ELM PL, we understand the unique risks faced by entrepreneurs, freelancers, and a variety of other industry professionals. Please contact us today at (888) 330-0696 to learn more about our Professional Liability products and more.