Is it true that freelancers don’t need to pay tax?

[Lily]

Many people say that freelancers do not need to pay income tax, especially if they work with foreign clients or receive payments in USD. Is this actually true?
Or do freelancers have to file taxes like normal salaried individuals?

 

[kebido]

No, that’s a misconception. Freelancers do have to pay taxes in most countries. They’re usually responsible for reporting their own income, paying income tax, and often self-employment or social security taxes. The rules vary by location, but being a freelancer doesn’t exempt anyone from taxes—you just handle them yourself.

 

[charlie]

No, that is not true. As any other income earner, freelancers are required to pay taxes. In the majority of countries, the freelance income is considered as the taxable self-employment income. Freelancers typically pay:

• Income tax on earnings
• Self-employment tax or social security tax (e.g. in the U.S. this is Social Security and Medicare tax).
• Taxes estimated quarterly since no tax is withheld by an employer on their behalf.

Freelancers are also allowed to deduce their business expenses such as software, equipment, traveling, internet and home office costs which contribute to lowering the amount of income subject to tax. Non payment of tax may lead to penalties, interest and legal problems.

 

[robertwilliam]

You cannot say that the freelancers are not liable to pay tax; taxation applies to all income generated through freelancing. Generally, freelancers have to pay both the federal government as income tax and the self-employment tax (Social Security and Medicare taxes) on the total net profit they make.