There’s one thing that’s for certain when you go from full-time employee to freelancer: your taxes get a whole lot more complicated. This is especially true for anyone who lost a job and received unemployment benefits as millions of laid-off workers did in 2020.

As an employee, taxes are automatically deducted from your checks. As a freelancer, you need to be proactive about figuring out how much you owe and making those payments on time. Here’s what you need to know. And please note: I am not a tax professional but am a full-time freelancer navigating the complicated tax space of multiple states and 1099s.

The basics

If you haven’t done any paperwork to set up a formal business, you’re operating as a sole proprietor. This means you’ll account for your business income on your personal tax return. If you’re set up as an LLC or S Corp, you’ll need to follow different procedures and should seriously consider hiring someone to help you with your taxes.

Even if you are a sole proprietor, hiring a tax professional can be a worthwhile investment, said freelance personal finance journalist Christopher Taylor. “Whatever cost it is, it pays for itself 10 times over,” the New Jersey resident said.

As a freelancer, you’re responsible for paying your federal income taxes, Medicare and Social Security taxes. Depending on where you live, you may also have to pay city and state taxes. If you’re in New York City, you’ve hit the trifecta: city, state and federal taxes. And if you collected unemployment, you’ll have to pay taxes on that money as well.

One annoying thing you’ll want to get used to: keeping your actual receipts. “If there’s an audit, the government is going to ask for actual receipts. A credit card statement isn’t enough,” said Jonathan Medows, a New York certified public accountant who specializes in working with freelancers.

The fine print

Instead of the W2s you’re used to, you’ll get 1099 forms as a freelancer. Any company that pays you more than $600 in a single year is required to send you a 1099. You’re expected to report the income even if they don’t.

Since taxes haven’t been paid on the money, you’ll see the full payment amount on these statements. You are responsible for managing your deductions, understanding the rules and making your tax payments on time.

As a freelancer, your net earnings — the amount of money you made after deducting your business expenses — is a key number. It determines how much you’ll owe in taxes and how much you can contribute to certain retirement accounts.

Remember, as someone who is self-employed you can deduct more than just rented office space, business cards, web hosting and professional memberships. Health insurance premiums, out-of-pocket medical costs and legal and accounting fees are all deductible as are portions of your utility bills. Self-employed people also may be eligible for the qualified business income deduction, which allows an additional 20% income tax deduction.

Any retirement contributions you make to traditional individual retirement accounts (or IRAs) and self-employed retirement accounts like simplified employee pension IRAs (or SEP IRAs) and 401ks are tax-deductible, an approach that can shave an additional $6,000 to $57,000 from your taxable income in 2020 while helping you save for your future.

If you’ve been working from home, you can deduct a portion — not all — of your rent or mortgage using the home office deduction. You can take additional deductions for any pandemic upgrades you may have made to your home office. This includes things like ergonomic chairs, desks, external monitors and professional services like Zoom.

If you decided to work from another state during the pandemic — even temporarily — you may have to pay income taxes to that state and be able to claim a tax credit from the original state. State tax laws vary, so this is the kind of situation where hiring help is likely to save you lots of headaches.

Yes, you’re on deadline.

As a freelancer, there are four deadlines that matter to you: April 15, June 15, Sept. 15, and Jan. 15 of the next year. These are your tax payment due dates.

A smart way to approach this is by putting 30% of every check into a separate account to pay your estimated taxes by these due dates. You may ultimately end up with a refund at the end of the year, which is always better than a late payment penalty.

While annual payments are an option, Medows recommends paying estimated taxes quarterly if you’re turning a profit.

Taylor agrees. Waiting until the final tax payment deadline can result in a tax bill bigger than a freelance journalist with a volatile income in a topsy turvy industry may be ready to pay.

This piece was originally published on Feb. 26, 2021.

Correction: The fourth deadline that really matters is Jan. 15 of the next year, not Dec. 15. We apologize for any creeping tax dread we may have caused.