Yay! So you want to become a freelance translator. Congratulations! You’re in good company. Did you know that more than 1 in 3 workers—that’s 53 million Americans—are now freelancing? According to the most comprehensive survey of the independent U.S. workforce in nearly a decade, “Freelancing in America: A National Survey of the New Workforce, approximately 34 percent of the American workforce is comprised of freelancers. Let’s face it: the new economy is here... and it’s driven by us.
Even so, setting up a business on your own can seem a daunting task. It’s hard to find information—for translators, by translators—consolidated in one place. So where do you start?
Fortunately for those of us in the United States, setting up as a freelancer is quite easy. If you’re translating all by your lonesome in your home office, all you really need to do in the beginning is start working. That’s it!
However, there are a few “must-dos” to keep in mind if you want your business to stay legal (and I promise you that you do!):
1. Register your business name.
If you want to do business under anything but your name, you’ll need to register a “Doing Business As” name (DBA) with your local government. This website explains how. Want to use your own name? Cool. Just skip this step.
2. Pay estimated taxes.
Unlike employees, freelancers don’t have their taxes withheld by an employer. As a freelancer, it is your responsibility to pay Uncle Sam and your state revenue agency practically as soon as you earn income each quarter. If you think you’ll owe $1,000 or more when you file your annual return, you must pay estimated taxes on income. For more information on how to calculate and make payments, read “How To Calculate and Make Estimated Tax Payments” here.
You must pay your estimated taxes every quarter, by the 15th of April, June, September and January for the previous year. To do this you have to use Tax Form 1040-ES, and can expect to pay around 15.3% of your income every quarter. It might be helpful to set up a separate bank account where you can park your money until you pay.
To make the process easier, you can sign up for the Electronic Federal Tax Payment system here.
3. New client? New W-9.
This will eventually become second nature for you. When you sign an agreement or start working with a new client, they might ask you to complete IRS Form W-9 (you might have to ask them for it). Filling out a W-9 is pretty easy: give your name (or your DBA) and social security number. The client keeps this form and doesn’t send it to the IRS. It’s just a formal certification that your tax ID (SSN) is correct. It also asks you if you are subject to backup withholding—but you’re probably not (ask your accountant!).
4. The dreaded 1099.
I kid... it’s actually not so bad! And plus, paying taxes means cool services like schools, roads and infrastructure as well as important stuff like social security. If you’ve earned more than $600 in a year from a client, they must report those payments to the IRS through Form 1099-Misc and send you a copy by the end of January each year. Important! Be sure it’s accurate—does the amount the client wrote down match your records? You don’t have to do anything else with your form... just file it in your records and use it as reference when reporting your annual income to the IRS. It’s sort of like the freelancer’s version of the W-2 form.
5. File your annual return.
To file your annual return, you’ll need to fill out both a Form 1040 (the mack daddy of all individual tax returns) and a Schedule C or Schedule C-EZ if you have expenses of $5,000 or less to report. Schedule C Instructions can be found here.
Important! To calculate your Social Security and Medicare taxes, you have to file Schedule SE (Form 1040, Self-Employment Tax. Use the income or loss calculated on your Schedule C or C-EZ to determine the amount of Social Security and Medicare you should have paid during the year. Here are some Schedule SE instructions for help filing.
For more information about Social Security for the self-employed, click here.
1. Use a W-9 for each new client that is a company or who you think will offer you one. If your client is an individual or foreign, keep all your invoices, contracts and write down every amount you were paid.
2. Some clients will send you a Form 1099 if you earned more than $600 from them in a year. They'll use this to file their taxes, and you'll get a letter in the mail with the amount. Keep this!
3. Another friendly reminder: keep all invoices for non-U.S. and non-W-9 clients.
4. File your 1040 and Schedule C or Schedule C-EZ at tax time.
5. File Schedule SE to calculate your Social Security and Medicare taxes.
6. Every quarter, file Form 1040-ES for your estimated taxes.
So what's next?
Stay tuned for posts in the works on preparing for retirement and helpful tax deduction tips.
About the Author
Audra de Falco is a freelance Italian, Spanish, French and Sicilian to English translator based in New York, NY. She has been working in the industry since 2003 and is an advocate of fair industry practices and translators' rights.