This post lists and describes ten tax terms that all U.S. freelancers should understand. (This list is mostly specific to freelancers who use Form 1040.)

Here’s the list of freelancing tax terms:

1. 1099-Misc.–As a freelancer, you will not receive a W-2 form from your clients. U.S. clients who pay you over $600 should send you a 1099-Misc. (You may also be required to send out a 1099-Misc. if you paid an individual more than $600 for their services.) Regardless of whether you receive a 1099-Misc for the year, you are responsible for reporting all income that you receive.
2. Asset–An asset is something with a monetary value that you use for your business. If you own a business asset that you will use for several years, check with your accountant to see if you can deduct depreciation expense.
3. EIN–The term EIN stands for employer identification number. Many freelancers will not need an EIN. However, if you incorporated your freelance business, operate as a partnership, or if you had employees (not contractors) during the year, you may need an EIN.
4. Expenses–These are the costs that are directly related to the running of your business. Examples of business expenses for a freelancer could include advertising, home office expense, supplies, business-related travel, and more. If this is your first year in business, you may also be able to deduct some of your start-up costs.
5. Gross Receipts–Gross receipts refers to the total amount of money that your freelancing business received before your expenses are subtracted. If you have a product that you sell, such as a WordPress theme, gross receipts include the amounts received from the sale of your product as well as any amounts received for services you provide.
6. Net Loss–If your business-related expenses are greater than your receipts for the year, then you may have a loss for the year.
7. Net Profit–If your receipts are greater than your business related expenses, then you may have a profit for the year.
8. Schedule C–Profit or loss from an independent contractor, sole proprietor, or a self-employed individual (this includes freelancing businesses) is reported on Schedule C of the Form 1040.
9. Self-Employment Tax–Self-employment tax consists of the Social Security and Medicare taxes that employers normally pay for their employees. As a self-employed freelancer, you are responsible for paying these taxes yourself. Use Schedule SE of the Form 1040 to figure out your self-employment tax liability.

Don’t forget about the health insurance deduction

A new deduction for freelancers this year is the deduction for health insurance costs for eligible individuals when computing self-employment taxes. This became law under the Small Business Jobs Act of 2010. You can learn more about this deduction from the IRS site.

Note: This post does not constitute legal or tax advice. For help with your own specific legal or tax issues, please contact a legal or tax professional.

See: Freelance Folder

Do freelance translators have to observe any other tax requirement specific to the profession? Please share.