Software for freelancers and self-employed workers

When you boil it down, 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 workers face a unique set of challenges when it comes to filing an annual return. For one thing, you need to maintain year-round business records that are separate from your personal ones to make sure you’re organized once tax season rolls around. You’re also responsible for making and keeping track of estimated tax payments(Opens in a new window)(opens in a new tab) each quarter, since the money isn’t automatically deducted from your paychecks throughout the year.

Perhaps most frustratingly, instead of getting a tax refund like the 9-to-5 crowd, you may actually need to cough up extra money to cover the year’s taxes in case those estimated payments were lower than needed. (You might even be penalized(Opens in a new window)(opens in a new tab) if you neglected to pay them altogether.)

Oh, and don’t forget about the whopping 15.3% federal self-employment tax(Opens in a new window)(opens in a new tab) you’re required to pay if you earned at least $400(Opens in a new window)(opens in a new tab) from your freelance work. Sure, it goes toward 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 your head isn’t already swirling from all that tax talk, consider the fact that a QuickBooks survey(Opens in a new window) of 500 freelancers found that doing one’s taxes is among the most difficult challenges facing modern self-employed workers. It’s an obnoxious, tedious ordeal — so obnoxious and tedious, in fact, that more than a third of freelancers don’t even bother paying taxes, according to the same poll.

Since tax evasion is sort of a felony if you are working a side hustle, filing your return every year is in your best interest. However, simply filing your taxes is not enough. 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 take care of your income tax return for you, but their fees could burn a hole in your pocket, too.

For a happy medium between the two, consider picking up some tax software.

What is tax software?

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

Back in the day, tax software came in the form of a CD-ROM that could be downloaded to your desktop computer. (How retro.) Nowadays, you can just download a program from a trusted tax prep company’s website. Or, even better, some tax preparation tools are available completely online or via mobile app for maximum convenience.

What should you look for in a tax software program?

“Freelancer” is synonymous with “self-employed business owner” in the eyes of the IRS (more specifically “sole proprietor(Opens in a new window)(opens in a new tab)“), so you’ll be reporting your business income and expenses on a Schedule C(Opens in a new window)(opens in a new tab) and your self-employment tax on a Schedule SE(Opens in a new window)(opens in a new tab); include both with your Form 1040(Opens in a new window)(opens in a new tab), the standard individual tax filing form. The tax software you use will definitely need to support that paperwork along with Form 1099-NEC(Opens in a new window)(opens in a new tab), the non-employee income document you get from your clients instead 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 client(s) paid you at least $600 that way.

Other good-to-have features include:

• An intuitive e-filing process with straightforward questions and prompts
• Some sort of accuracy and maximum refund guarantees
• Solid customer support, with optional access to a real live tax expert in case of emergency

Don’t forget that you’ll also need to file your state taxes in addition to your federal taxes (unless yours doesn’t collect an 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 will include one state for free, but most will charge you per state where you need to file.

Also, keep in mind that the cheapest tax software option isn’t necessarily the best tax software option. The program you choose should be robust enough to handle complicated tax situations and sniff out tons of possible deductions, and also willing to promise a high-ish level of protection in case you’re audited. In other words, now’s not the time to get stingy: You want to get your taxes done, but also done right. That’s not to say you should pay for features you don’t need, but just make sure your bases are covered.

What can freelancers write off on their taxes?

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

Is it worth it to have an accountant do your taxes?

If you have a pretty straightforward tax situation, if you already have a few years of filing as a freelancer under your belt, and/or if you make under $73,000 a year, you may be able to get away with a free filing option through the IRS’ Free File program(Opens in a new window)(opens in a new tab). However, most freelancers are going to have complicated-enough tax situations to warrant a paid software solution with premium features and built-in support from seasoned tax professionals. Budget for around $105 for your federal return and about $50 for every state return.

This is all to say that you probably don’t need to splurge on a real, live CPA, but that’s always an option if you don’t feel great about filing on your own. According to a National Society of Accountants survey(Opens in a new window), the standard U.S. firm charges an average of $343 for an itemized(Opens in a new window)(opens in a new tab) Form 1040 with a state return and $220 for a non-itemized Form 1040 with a state return, plus $192 for a Schedule C and $41 for a Schedule SE. Most will also bill you for 1099s ($67.72 on average) and disorganized or incomplete files ($165.82 on average).

What’s the best tax software for freelancers?

Here are the software options with Schedule C, Schedule SE, Form 1099-NEC, and Form 1099-K support that we recommend for the 2023 tax season.

Sage Business Cloud Accounting

Sage Business Cloud Accounting is just one part of a larger portfolio of products from Sage, which is a very well known name in the UK. As you’d expect, it’s therefore up to speed when it comes to HMRC’s Making Tax Digital campaign, while offering something for business of all sizes.

Sage often has deals available on its packages, so prices change quite often. However, there’s currently a Start accounting package, which offers entry-level accounting and is aimed at sole traders. Next up is a Standard accounting package, which is aimed firmly at small businesses. Sage also has a Plus package, which offers more advanced features for small business needs.

All of these editions allow you to add on Payroll functionality for an additional monthly fee on top of your subscription cost for the package itself. The accounting tools also allow you to build up a dynamic picture of your business prior to filing your tax return each year.

You can submit VAT returns to HMRC with all of the packages, while other key features include being able to connect to your bank accounts, send and track invoices along with being able to share your accounting data with your accountant. There’s a good degree of support too including online, email and phone. The cloud-based software works across all platforms too.

H&R Block Self-Employed Online

The best option for a freelancer who’s not confident enough to do their taxes solo, H&R Block’s seamless online self-employed package(Opens in a new window)(opens in a new tab) works by walking you through a series of simple, conversational questions — the sort you’d expect from a real live CPA. It’ll help you claim all sort of industry-specific deductions and business expenses, including asset depreciation and student loan interest, to guarantee your biggest possible refund. (This is one of its four big guarantees along with Audit Support, 100% Accuracy, and No Surprises.) You won’t pay until you actually file, and you can even use your refund to do so.

But what truly sets H&R Block apart is its myriad user support options: You can reach out for technical support via phone and chat, access online tax filing and software tips on its exhaustive support center(Opens in a new window)(opens in a new tab), get unlimited, on-demand help from a live tax pro with Online Assist(Opens in a new window)(opens in a new tab), or make an appointment(Opens in a new window)(opens in a new tab) at a brick-and-mortar H&R Block office for IRL help. The latter two will cost you extra, but they can be worth it if you have an especially complex tax situation (like many different income streams) or if you’re stuck on a tough question that goes beyond what the accounting software provides.

TaxAct Self-Employed

TaxAct promises TurboTax and H&R Block-worthy features at a lower price point, and it mostly succeeds. Its Self Employed(Opens in a new window)(opens in a new tab) online package includes year-round tax planning help, a real-time refund status, multiple import options, and a Deduction Maximizer that pinpoints the deductions that are most commonly claimed by filers like you. Audit defense is a separate purchase through ProtectionPlus(Opens in a new window)(opens in a new tab), though, and its overall filing process lacks conversational guidance. There’s also no chat support for newbies who need help.

On the plus side, TaxAct was waiving fees for its Xpert Assist(Opens in a new window)(opens in a new tab) service on all returns at the time of publication, which unlocks unlimited phone assistance from its CPAs; they can provide advice throughout the return prep process and give your taxes a once-over before you file. That’s huge considering how much its competitors charge for live expert help

TaxSlayer

If you’re willing to forgo some of the more advanced features out there if it means paying half of what TurboTax is charging, go with TaxSlayer. Beyond supporting all relevant forms, its Self-Employed(Opens in a new window)(opens in a new tab) software comes with free audit defense, live chat support, and the option to talk to a tax professional(Opens in a new window)(opens in a new tab) with self-employed expertise if you run into issues. (Its lower-tier Simply Free and Classic programs only include phone and email help.) Plus, like H&R Block, you can use your refund to pay for the program under its zero out-of-pocket fees guarantee.

Notably, TaxSlayer does pay a little more attention to features you can use outside of tax season, including quarterly estimated payment reminders and personalized tax and income tips. Definitely look into it if staying organized throughout the year gives you more trouble than actually filing.