Independent contractor taxes in Georgia: freelancer tax management guide

If you’ve decided to work as an independent contractor in Georgia, you must understand your tax obligations. 

Having a solid grasp of the requirements will ensure you accurately file and pay taxes on your freelance income. From self-employment tax rates to relevant tax forms and misclassification risks, knowing the requirements can help you stay compliant and avoid penalties. Ultimately, proper tax planning will help you maximize deductions and keep more of the money you earn.

Managing your taxes as an independent contractor may seem daunting. 

This comprehensive guide covers everything you need to know as a self-employed freelancer in Georgia. You'll learn how contractor taxes work, how much you need to pay, which forms to file, how to pay estimated quarterly taxes, and how to stay compliant.

So, let’s dive in.

How do independent contractor taxes work in Georgia?

To understand your tax obligations as an independent contractor in Georgia, you first need to understand how self-employment taxes function in the state. 

Here's an overview of the key elements:

What are the self-employed tax rates in Georgia?

As a self-employed freelancer, you pay self-employment tax on your net earnings at a rate of 15.3%. This tax rate consists of the following:

• 12.4% for Social Security

• 2.9% for Medicare

As an independent contractor, you are responsible for paying the full share (typically split between employer and employee) of these two federal payroll taxes that fund Social Security and Medicare. So if you had $50,000 in net self-employment income in Georgia, you would owe $7,650 (15.3% of $50,000) in self-employment taxes.

What amount of income is taxable for self-employed workers in Georgia?

The threshold for paying self-employment tax in Georgia is $400 or more in net earnings from self-employment.

But what if your net earnings are less than $400? Even if your net earnings are below $400, you must still file an income tax return. Filing your income tax return ensures you comply with the tax laws and regulations. Determine your filing requirements based on Form 1040 and 1040-SR guidelines.

What are the relevant contractor tax forms in Georgia?

When it comes to filing your taxes as an independent contractor in Georgia, there are several forms of which you need to be aware. These forms ensure you accurately report your income and pay the appropriate taxes. Here are the relevant tax forms in Georgia:

• Form 1040 Schedule C. Use this form to report your income and expenses from self-employment. It's filed with your personal 1040.

• Form 1040 Schedule SE. Use Form 1040 Schedule SE to determine your self-employment tax. 

• Form 1040-ES. This form assists in calculating your estimated tax liability and ensures you meet your quarterly payment requirements.

• Form 1040-SR. If you are over 65, file your federal taxes with Form 1040-SR instead of the regular 1040.

• Form 1099. Keep an eye out for Form 1099, which clients or businesses provide if they paid you $600 or more during the tax year. This form reports your income from freelance work or contract services.

• Form 1099-G. Form 1099-G reports any government payments you received, such as unemployment compensation or state tax refunds.

• Form 1099-INT. If you earned interest income from business savings or investments, you may receive a Form 1099-INT.

• Form GA-500. This form is the Georgia income tax return for filing state income tax.

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How do independent contractors pay taxes in Georgia?

As an independent contractor, how you pay taxes in Georgia can be different than it is for regular employees. Here's what you need to know:

How much should contractors withhold for taxes in Georgia?

You'll need to stay disciplined and set aside a percentage of every payment you receive as a contractor to cover your estimated income and self-employment taxes. The IRS recommends having at least 90% of your tax liability withheld and/or paid quarterly to avoid penalties.

To determine how much to set aside, you can make quarterly estimated payments using the 1040-ES worksheet based on your prior-year income and taxes due. As a guideline, you can plan to set aside 15–30% of your gross self-employment income for taxes. But check your prior-year tax return and expected deductions when estimating.

Some contractors make quarterly payments equal to one-fourth of their total prior-year tax burden. Just be sure to account for any expected increase or decrease in your freelance income compared to last year.

Can an employer withhold taxes for an independent contractor in Georgia?

No. Employers should only withhold federal and state income taxes, Social Security taxes, and Medicare taxes for their employees. As an independent contractor, clients cannot legally withhold taxes for you from their payments to you.

The company or client pays you the full contracted amount. As a self-employed freelancer, you alone are responsible for making quarterly estimated tax payments and annual tax filings in Georgia to stay compliant.

Can an employer be indemnified by an employee/independent contractor for taxes?

If the company properly classifies you as an independent contractor, you can't indemnify the employer for taxes. The company has no tax withholding, payment, or filing duties on your behalf. As an independent contractor, you are responsible for all applicable federal, state, and self-employment tax compliance and payments.

Do self-employed freelancers in Georgia have to pay quarterly taxes?

Yes, making quarterly estimated tax payments is mandatory. You must make installment payments on your expected federal income tax and self-employment taxes four times a year.

No matter how busy you work as an independent contractor, you must comply with the quarterly tax payment schedule with the IRS and Georgia’s Department of Revenue.

Estimated quarterly payments are generally due by mid-April, June, September, and January. If you don't pay enough through quarterly estimates, you may face underpayment penalties when you file your annual return.

Quarterly payments help ensure you stay on top of your tax liability throughout the year rather than facing a large bill at tax time.

Is VAT or sales tax relevant for independent contractors in Georgia?

Most self-employed freelancers and independent contractors in Georgia who sell business-to-business services (rather than retail goods) don’t need to worry about VAT or sales taxes. For example, a contractor providing consulting, writing, or web design services to other companies normally doesn't charge sales tax.

Also, the United States does not have a VAT system. Your primary focus as an independent contractor operating in Georgia is on income and self-employment taxes. Always check with your accountant or tax advisor if you're unsure about your sales tax obligations.

How to file Georgia self-employment taxes: step-by-step guide

Here's a step-by-step guide to help you understand how to file and report your self-employment taxes in Georgia:

• Gather all your business records and 1099 forms. You'll need these to calculate your net self-employment income.

• Fill out Schedule C to calculate your net business income. List all business income, then subtract eligible deductions like mileage, supplies, home office, etc.

• Use Schedule SE to pay your 15.3% self-employment tax bill. It covers Social Security and Medicare taxes.

• Make your quarterly estimated tax payments during the year based on your expected tax liability. File 1040-ES vouchers with the IRS.

• By January, receive your Form 1099 (Form 1099-NECs and 1099-MISCs) from clients reporting your income.

• Before the April tax deadline, file your annual Form 1040 with attached Schedule C and Schedule SE. Pay any remaining taxes owed.

• Submit your Georgia Form 500 individual state income tax return before the state deadline to report income and pay remaining state taxes.

Following this process each year will help you systematically report your freelance income, deductions, self-employment tax liability, and estimated quarterly payments.

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What is an independent contractor according to Georgia law?

The state had traditionally followed the federal IRS 20-factor test to distinguish between independent contractors and employees. But Georgia updated its definition of an independent contractor effective July 1, 2022, under the Employment Security Law.

The updated Georgia law now examines the following seven factors when determining if a worker qualifies as an independent contractor or employee:

• Ability to work for other companies or hold other employment simultaneously

• Freedom to accept or reject work tasks without consequence

• No minimum hours to work or minimum number of orders to obtain (in the case of sales)

• Discretion to set own work schedule

• Minimal instructions and no direct oversight or supervision

• No territorial or geographic restrictions, and

• No requirement or compulsion to perform, behave, or act in a manner related to the performance of services for wages

The dangers of contractor misclassification in Georgia

Contractor misclassification in Georgia is a serious issue that contractors and clients must be aware of. Misclassification can lead to financial risks and penalties for both parties. Contractors can lose important benefits and face higher taxes, while employers may face fines and legal disputes. 

To assist you in navigating the topic of contractor misclassification, Remote offers helpful guides on the following:

• Managing misclassification

• Understanding misclassification penalties

How do I ask my company to convert me into an employee?

If you currently work as a freelancer but want to become an employee for a client, how should you bring this up with your client? Here are some tips.

• Gather evidence showing you function as an employee, like set hours, supervised work, etc.

• Have a conversation with the employer for whom you work. Express your concerns about your classification and discuss‌ transitioning to an employee role.

• Emphasize how your skills and experience can provide an even greater impact in an employee role with more integrated responsibilities.

• If your employer is open to the idea, you'll likely need to negotiate the terms of your employment. It could include compensation, benefits (such as health insurance, paid time off, and retirement plans), work hours, job duties, and other relevant terms.

Remember that converting from an independent contractor to an employee can be complex. An employer of record, such as Remote, can make this process fast and easy. 

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How do I get paid as an independent contractor in Georgia?

As a self-employed freelancer in Georgia, there are the following options for getting paid by your clients:

Various options for paying independent contractors in Georgia

Common payment methods used by companies to pay independent contractors in Georgia include:

• Bank transfer (ACH). Your client can ACH transfer directly to your bank account each time you invoice.

• Wire transfer. This type of payment works internationally but often has high fees per transaction.

• Check. Your client can issue and send physical checks to your mailing address. However, this method is less convenient and slower than electronic options.

• PayPal/Stripe. You can receive payments online in your accounts through these platforms.

• Employer of record. A company like Remote acts as a legal employer to manage payments and taxes for contractors giving companies a stress-free experience while hiring contractors abroad.

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Remote's contractor payment process

Using an automated contractor payment management platform like Remote simplifies getting paid as a contractor. Here's an overview of Remote's five-step payment process:

• Onboard as a contractor. Your client invites you to Remote to securely enter your payment details.

• Sign your contract. Use Remote's localized contract templates or upload your own.

• Submit invoice. Log hours and bill your client by uploading your invoice into the Remote dashboard for approval routing. No more emails back and forth.

• Client approves and pays. Remote verifies that invoice meets billing terms and facilitates consolidated contractor payroll.

• You get paid. Remote transfers payment to your preferred bank account, in your local currency, on consistent pay schedules.

Learn more about the Remote contracting process.

Remote's contractor management features

If your clients sign up for Remote, it provides them (and you) with a complete contractor payment management solution, including the following:

• Payments in 170+ countries. Receive contractor payments from clients worldwide into your local bank account.

• Localized contracts. Ensure compliance with customized, legally vetted contractor agreements for your jurisdiction.

• All-in-one platform. Manage client relationships, track invoices, and access payroll documents in one place.

• Health insurance. Protect yourself with comprehensive, affordable health coverage plans.

• Tax support. Get support understanding your tax obligations in Georgia and using deductions, even if you are a remote or international contractor.

Combined with intuitive self-serve onboarding and transparent tracking of your invoices and payments, Remote provides the most advanced all-in-one solution for getting paid globally as a contractor. Learn more about Remote’s Freelancer Hub and how it can help you manage your clients, contracts, and payments in one platform.

Your path to stress-free freelancing in Georgia

Navigating ‌independent contractor taxes in Georgia can be a hassle.

Hopefully,  this guide has unpacked the intricacies of self-employed tax rates, the threshold of taxable income, and tax forms. We’ve also highlighted the importance and risks of misclassification. 

When it comes to getting paid, Remote's contractor management solution emerges as your reliable partner. Imagine a streamlined process: onboarding, contract signing, invoice submission, client approval, and finally, you get paid in your local currency. With features encompassing international payments, localized contracts, automated invoicing, health insurance, and tax management, Remote truly has your back. 

Want more details? Check out Remote's solutions for contractors and Remote’s contractor management services for a wealth of information to support your freelance journey.

So, why wait? Start your journey toward hassle-free freelancing. Get started with Remote today and grow your freelance career in Georgia.

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