The best tax software for freelancers and self-employed filers in 2023

Freelancers aren’t just sweatpants and snooze buttons.

Well, sometimes it is. But more often than not, it’s cabin fever, caffeine withdrawal, fickle cash flows, and stiff competition for customers.

When you get to the heart of it, being your own boss is really hard work — and no time is that more apparent than during tax season.

Compared to those with a typical 9-to-5 job, freelancers, independent contractors and other self-employed people face a unique set of challenges when filing an annual return. For one, you need to keep business records separate from your personal year-round to ensure you’re organized once tax season kicks in. You are also responsible for making and tracking estimated tax payments(Opens in a new window)(opens in a new tab) every quarter, since the money isn’t automatically deducted from your paycheck throughout the year.

Perhaps most frustratingly, instead of receiving a tax refund like the 9-to-5 crowd, you may actually have to spend extra money to cover the year’s taxes if those estimated payments were lower than required. (You might even be fined(Opens in a new window)(opens in a new tab) if you have failed to pay them in full.)

Oh, and don’t forget the whopping 15.3% self-employed federal tax(Opens in a new window)(opens in a new tab) You have to pay when you have earned at least $400(Opens in a new window)(opens in a new tab) from your freelance work. Sure, it’s headed towards Social Security and Medicare, which is cool for Future You – probably maybe?(Opens in a new window) – but not so fun for Current You.

If all the tax talk hasn’t got your head spinning, consider the fact that a QuickBooks opinion poll(Opens in a new window) of 500 freelancers found that tax collection is one of the most difficult challenges facing the modern self-employed. It’s a sickening, drawn-out ordeal — so sickening and drawn-out that more than a third of freelancers don’t even bother paying taxes, according to the same survey.

Because tax evasion is a type of crime, it’s in your best interest to file your tax return every year. However, it is not enough to just file your tax return. If you try to figure it all out on your own, you could still be hit with costly penalties and interest if you make a mistake. On the other hand, you could always go to a CPA and have them do your income tax returns for you, but their fees could also put a dent in your pocket.

For a good middle ground between the two, consider tax software.

What is tax software?

Tax software is a type of software program designed to guide users through the process of preparing and filing their tax returns, helping them comply with tax laws while identifying potential deductions and credits. Essentially, it’s software that makes doing your own taxes less of a hassle.

In the past, control software came in the form of a CD-ROM that could be downloaded onto your desktop computer. (How retro.) These days, you can just download a program from a trusted tax firm’s website. Or, even better, some tax prep tools are available entirely online or via a mobile app for maximum convenience.

What should you look for in tax software?

“Freelancer” is the same as “self-employed business owner” (more specifically, “sole proprietor” in the eyes of the IRS).(Opens in a new window)(opens in a new tab)“), so report your business income and expenses in Appendix C(Opens in a new window)(opens in a new tab) and your Independence Tax on a Schedule SE(Opens in a new window)(opens in a new tab); Include both of them on your Form 1040(Opens in a new window)(opens in a new tab), the standard form for individual tax returns. The tax software you use must definitely support this paperwork along with the Form 1099-NEC(Opens in a new window)(opens in a new tab), the non-employee income document you receive from your clients in place of a W-2. You may also receive a Form 1099-K(Opens in a new window)(opens in a new tab) from a third-party payment network like Venmo or PayPal if your customers paid you at least $600 that way.

Other useful features are:

• An intuitive e-filing process with simple questions and prompts

• A certain accuracy and maximum refund guarantees

• Solid customer support with optional access to a real live tax expert in an emergency

Don’t forget that you must also file your state taxes in addition to your federal taxes (unless your taxes do not collect income tax).(Opens in a new window)(opens in a new tab) – see Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming). Some tax software providers offer one state for free, but most will charge you per state where you need to file a file.

Also remember that the cheapest tax software option is not necessarily the best tax software option. The program you choose should be robust enough to handle complicated tax situations and track down tons of potential deductions, and also be willing to promise a high level of protection should you get audited. In other words, don’t be stingy: you want to do your taxes, but you also want to do them right. That’s not to say you should pay for features you don’t need, but just make sure your basics are covered.

What can freelancers deduct for tax purposes?

Speaking of deductions, the one thing freelancers have for them during tax season is the fact that they can write off a lot more work-related expenses than the average salaried employee — these include office supplies, Internet bills, meals, education, mileage, health insurance premiums, and your share of Rent that covers your home office. Don’t get too brazen though: These expenses must be “both ordinary and necessary” to your business, according to the IRS(Opens in a new window). (So ​​you couldn’t write off a road trip just for fun, for example.)

Is it worth having an accountant do your taxes?

If you have a fairly straightforward tax situation, if you’ve already filed as a freelancer for a few years, and/or if you make less than $73,000 per year, you may be able to get away with a free filing option using the IRS’s free filing program(Opens in a new window)(opens in a new tab). However, most freelancers have complicated tax situations to justify a paid software solution with premium features and built-in support from experienced tax professionals. Plan on about $105 for your federal return and about $50 for each state return.

This is all to say that you probably don’t need to impersonate a real CPA, but that’s always an option if you’re not comfortable filing alone. According to a survey by the National Society of Accountants(Opens in a new window)the standard US firm charges an average of $343 for a single statement(Opens in a new window)(opens in a new tab) Form 1040 with a State Declaration and $220 for an unspecified Form 1040 with a State Declaration, plus $192 for a Schedule C and $41 for a Schedule SE. Most will also charge you for 1099s ($67.72 average) and disorganized or incomplete files ($165.82 average).

What is the best tax software for freelancers?

Here are the software options with support for Schedule C, Schedule SE, Form 1099-NEC, and Form 1099-K that we recommend for the 2023 tax season. (Note: All products below are online products that were live in Fall 2022.)