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Fiverr Taxes: An Ultimate Guide to Filling Fiverr Income Tax

Fiverr Taxes: An Ultimate Guide to Filling Fiverr Income Tax
Ines Zemelman, EA
11 March 2022

Filing your Fiverr taxes can feel like an uphill battle. You have no idea where to begin, but you know that you better do it perfectly. The gig economy seems a lucrative option, but it comes with its problems. TFX has taken into account all that you'll need to go from feeling overwhelmed to successfully doing your taxes with comfort. By the time you are done reading, you will understand exactly how to file your Fiverr taxes and how to reduce your tax burden as much as possible.

Reporting Fiverr 1099 Income

For many people, Fiverr and taxes are a little confusing combination. Therefore, it is very important for you to understand that Fiverr does not withhold taxes on your behalf. As a result, you are solely responsible for making sure that you are paying your Fiverr income tax to the IRS on time. So, what taxes do you pay to the IRS as a seller on Fiverr?

As a Fiverr seller, you are obligated to three types of taxes.

The Federal and State Income Taxes 

The federal and state taxes are the first two categories. The exact tax rate you must pay is determined by your federal and state tax brackets, which might vary depending on your income. The self-employment tax rate in 2021 was 15.3%

Self-Employment Taxes

Self-employment taxes are the next type of taxes you must pay. These taxes consist of Medicare and Social Security. Medicare is taxed at 2.9 %, and Social Security is taxed at 12.4 % for a combined rate of 15.3%. Since the IRS considers Fiverr and Upwork gig workers to be independent contractors, a self-employed individual must pay this percentage of self-employment income taxes. You are required to pay Fiverr taxes because you are both a business and an employee. 

Now that you've determined your tax rate let's look at how to obtain your income information.

Understanding 1099 Tax Forms

As a general rule, if you earn more than $600 in taxable income during the calendar year, you should receive a 1099-NEC. This replaces the prior year's Form 1099-MISC. However, Fiverr would not issue you a 1099 form to file Fiverr income tax because they are not a US firm.

It's a common misunderstanding among Fiverr sellers that they don't need to report their earnings because they didn't get a 1099 form. To be clear, even if you made less than $600 or did not receive 1099, you must report any earnings from Fiverr. A 1099-K from PayPal is the only form you'll get for your Fiverr gigs, but you'll need to earn over $20,000 and have 200+ transactions to qualify. If you live in Virginia, Vermont, Maryland, or Massachusetts and processed $600 or more in total PayPal payments, you will receive a 1099-K. In Illinois, the cap is $1,000 with at least three transactions. 

When You Don’t Receive 1099-K Form

If you have not received a 1099-K from PayPal before January 31st, you will most likely not receive one from them. If you are aware that you are liable to receive one but haven't, contact their customer service before submitting your taxes. If you earned less than the state's minimum, you must obtain your income details from your Fiverr account. Here is how you can do it:

  1. On your Fiverr.com dashboard, go to the "Earnings" page. 
  2. Select the year you must pay taxes and then click "Export to CSV." 

This will give you all of your taxable earnings after Fiverr's 20% fees have been deducted. Please keep this information handy since you'll need it to complete Form Schedule C.

Now that you've your income details, you need to determine whether you owe quarterly taxes or not.

Fiver Tax Deadlines

If you think that you'll end up paying $1,000 or more in Fiverr taxes to the IRS at the end of the year, then you must pay estimated taxes each quarter.

Estimated quarterly taxes must be paid by:

  • Q1: April 15th
  • Q2: June 15th
  • Q3: September 15th
  • Q4: January 15th

If you do not pay the required quarterly taxes, you may end up paying underpayment penalties. To avoid this issue, make sure you know exactly how much you need to pay in estimated taxes. Quarterly tax payments do not allow taxpayers to write off business expenses. You must wait till you file your annual taxes between January 15th and April 15th. Keeping track of your tax-year costs well before the deadline is essential to prevent overpaying.

Fiverr Tax Deductions

To minimize your Fiverr income tax burden, you must keep detailed records of all business-related spending. You may accomplish this with a separate company credit card and bank account.

Tax deductions for Fiverr expenses include:

  • Software that you use to complete gigs
  • Deduction for home office expenses incurred
  • Software for accounting and spending tracking
  • The part of your computer, phone, and internet cost devoted to business use
  • Fees for legal services, such as your business entity licensing
  • Interest on a business loan
  • Paying for a nanny while you work
  • Education and training in your industry

Once you've gathered all of your tax-deductible expenses, you can start filling out your Form Schedule C Profit or Loss From Business. You will enter all of your income details and your spending to reduce your tax burden. 

Conclusion

Filling your Fiverr taxes may seem like a very hectic task to accomplish. Following a step-by-step, smooth, and simplified method from reporting your Fiver taxes to understanding Fiverr tax forms and writing off business expenditure can transform this seemingly overwhelming process into doing it successfully with ease. 

Ines Zemelman, EA
Founder of TFX