If you sell on Fiverr, you need to know how much money to set aside for taxes, what tax forms to look for, and how to file your Fiverr taxes. Of course, you’ll also want to know how you can pay less in taxes to keep more of your money. This guide tells you everything you need to know to get started with your Fiverr tax return.
Do you have to pay taxes on Fiverr income?
When you sell in an online marketplace like Fiverr, it’s the same as having your own bricks-and-mortar business. The income you receive is taxable, and it’s considered self-employment income.
Self-employed people must file Schedule C with their Form 1040 to report their income. The only exception is if you made less than $400 in a year. Even if you’re under the standard deduction for income taxes, you’ll still need to pay self-employment taxes.
If you have business expenses, you can deduct those and only pay taxes on your profits.
Self-employment taxes include Social Security and Medicare. These are the FICA taxes you’ll see on a W-2 job paystub.
The tax rate is 15.3%. This is double what you pay as an employee in a W-2 job because gig workers pay both the employee’s and employer’s share of self-employment taxes.
Depending on the type of work you do, you may be able to reduce your self-employment taxes by creating an S-corporation.
Federal and state income taxes also apply to self-employment income. The rate you pay depends on your tax bracket and your total taxable income.
For example, if you make $90,000 in your main job and $10,000 on Fiverr, your gross income is $100,000. To find your taxable income, subtract your personal deductions like the standard deduction and traditional IRA contributions.
State tax brackets obviously vary by state. As a general rule, you report Fiverr income to the state you live in not the state where your client is located.
Sellers generally don’t need to charge, collect, or pay sales taxes. That’s because your clients are technically buying through Fiverr not you.
Fiverr adds sales tax to the purchase price and submits the tax to the state where applicable.
In limited situations, the seller remains liable for any taxes imposed by their local law that Fiverr doesn’t collect. Ask a tax accountant if you believe the goods or services you sell may be subject to a tax that you need to pay.
How should you track your income?
Fiverr provides an earnings report in your account. However, it’s also a good idea to use your own accounting software. If you sell on multiple platforms, this helps you to add everything up as you go so you don’t have any surprises at tax time. Using your own accounting software also ensures you’ll still have your records even if you leave the Fiverr platform.
There are several online bookkeeping services you can use to link your bank account and automatically track all of your business income and expenses.
What tax forms do you get from Fiverr?
Fiverr uses third-party payment networks to pay you. This means you won’t get a 1099-NEC directly from Fiverr, but Fiverr is not an under the table job.
Whether you choose to get paid through PayPal or Payoneer, they’ll send you a 1099-K if you make more than $600 in a calendar year. This includes from Fiverr and anyone else who paid you the same way.
(For tax years including 2021 and earlier, you would only get a 1099-K if you made more than $20,000 and had more than 200 transactions.)
Fiverr international sellers generally don’t receive any tax forms. However, you may still be responsible for taxes in your home country.
What if you don’t receive a tax form?
You have to report your Fiverr income even if you don’t receive a 1099. You can use your total sales from your accounting software or your Fiverr account to file taxes.
If you believe you should have received a tax form but didn’t, first check your payment history in Fiverr and the payment service. A common situation is if you got paid in January instead of December so that payment would go on next year’s taxes.
If you still think you should have gotten a tax form, you’ll have to contact PayPal or Payoneer customer support. Also, check your contact information on those platforms is correct. Fiverr can’t help you with a missing 1099 since they’re not the ones issuing the 1099s.
How do estimated taxes work?
Fiverr doesn’t withhold taxes for you. Neither does PayPal nor Payoneer. Instead, you need to make estimated tax payments each quarter. If you wait until April to pay your taxes, you’ll likely have to pay penalties and interest for underpaying your quarterly taxes.
The table below shows the estimated tax requirements. You can pay based on this year’s or last year’s taxes.
|Based on Current Year Tax Return||Based on Prior Year Tax Return|
|AGI up to $150,000 ($75,000 if married filing separate)||90% of current year taxes||100% of prior year taxes|
|AGI over $150,000 ($75,000 if married filing separate)||100% of current year taxes||110% of prior year taxes|
To avoid the estimated tax penalty, you must pay one of the above percentages through a combination of estimated tax payments and withholding. Typically, you need to make four equal payments. If you have uneven income, you can use the annualized income installment method.
You generally make four equal payments. For example, if you need to pay $10,000 in quarterly taxes, you’ll make four $2,500 payments.
If some of your taxes are covered by withholding from another job, the withholding counts towards your estimated taxes. For example, if you need to pay $10,000 in taxes and will have $8,000 in withholding, you need to make $2,000 in estimated taxes. You can divide your estimated tax payments into four $500 payments.
What are the due dates for quarterly taxes?
The due dates to pay quarterly estimated taxes are April 15th, June 15th, September 15th, and January 15th. In other words, your first estimated tax payment is due on the same date as last year’s tax return. Your last estimated tax payment is due three months before your tax return is due.
|Action Needed||2022 Tax Year||2023 Tax Year|
|First Quarter Estimated Tax Payment Due||April 18, 2022||April 18, 2023|
|Second Quarter Estimated Tax Payment Due||June 15, 2022||June 15, 2023|
|Third Quarter Estimated Tax Payment Due||September 15, 2022||September 15, 2023|
|Fourth Quarter Estimated Tax Payment Due||January 17, 2023*||January 16, 2024*|
|Receive Your 1099||No later than January 31, 2023||No later than January 31, 2024|
|File Your Tax Return||Tuesday April 18, 2023 (15th is a Saturday; Monday is Washington, D.C., Emancipation Day)||April 15, 2024|
|Extended Filing Deadline||Monday October 16, 2023 (15th is a Sunday)||October 15, 2024|
*You can skip the final estimated tax payment if you file your tax return and pay your full balance due by February 1st.
How do you pay estimated taxes for the first time?
If you’ve never paid estimated taxes before, you might not know how much to pay. A good rule of thumb to start with is setting aside 1/3 of your income for taxes. Once you have a better idea of how much you’ll earn in a year, you can do more precise calculations.
What tax deductions are available to Fiverr sellers?
There are a few automatic tax deductions most Fiverr sellers will qualify for.
- Qualified Business Income (QBI) Deduction equal to 20% of your taxable business income
- One half of your self-employment tax since your employer would pay half if you were an employee
- Health insurance premiums if you purchased health insurance as a business owner
- Federal SALT deduction for state income taxes
What Schedule C tax deductions can you take?
Your exact deductions will vary based on what you’re selling. The general rule is that you can deduct ordinary and necessary business expenses.
Here are some common examples.
- Cost of materials if you sell physical items
- Software subscriptions you use in your business
- The business portion of your computer, internet, and phone costs
- Subcontractors you hire to help you
- Continuing education expenses related to your profession
Can you claim the home office deduction?
Fiverr sellers can qualify for the home office deduction. However, the rules are very strict. You need to have a fully separate office that you don’t use for anything else like paying your bills or letting your kids do their homework on your computer.
What are your chances of being audited for Fiverr taxes?
The IRS keeps your exact audit chances a secret, but there are a few things you should know.
The IRS will generally go by your 1099-K for your income for Fiverr taxes. If you believe your 1099-K is incorrect, try to get Fiverr to fix it. Otherwise, you might get a letter from the IRS and have to explain what’s going on.
The Inflation Reduction Act gives the IRS funding to hire 87,000 new agents. Many of them will audit small business tax returns of those making less than $400,000 per year.
Many independent contractors play fast and loose with tax deductions because they’ve never been audited or heard other people have never been audited. With your audit chances going up, now is a good time to make sure you’re taking proper deductions and keeping the proof that you need.
Frequently Asked Questions
I just sell a little bit on Fiverr. Do I still have to pay taxes?
You will need to report any amount of your income on your tax return. You may be required to file a tax return for several reasons, including having more than $400 in self-employment income or being above the standard deduction.
I didn’t receive a 1099-K from PayPal. Do I have to declare my Fiverr income?
You still have to report your Fiverr income even if you didn’t receive a 1099.
Which expenses can I deduct for my Fiverr business?
You can deduct the ordinary and necessary expenses associated with your work, like business software costs and the cost of materials you use.
Do I have to pay taxes for Fiverr if I use all the money I make on the website and don’t withdraw it?
Your income is taxable as soon as Fiverr makes it available to you. You can’t not withdraw it to wait to pay taxes.
Filing taxes as a Fiverr seller is easy, but you have to plan ahead. Take the time to make sure you understand the basics and contact a tax professional if you have any questions.