This Is How Freelancers Can Avoid an IRS Surprise in 2026
Freelance life comes with a lot of surprises, and some are more fun than others. An invoice getting paid early? That’s a fun surprise. Finding out you owe the IRS thousands of dollars at tax time? That’s the kind of surprise freelancers want to avoid at all costs.
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So how can independent workers steer clear of an uncomfortable conversation with their tax preparer next spring? MoneyLion spoke with Kelsey Szamet, a partner at Kingsley Szamet Employment Lawyers, to get some tips on how freelancers can plan ahead — and avoid any unwanted surprises with the IRS.
1. Know That the “Tax Surprise” Isn’t Just the Bill — It’s the Penalties, Too
Szamet has a simple definition of a tax surprise for freelancers: It’s any tax expense you didn’t plan for. While many people focus only on the final tax bill, she says freelancers are often caught off guard by underpayment penalties and interest that can pile on top of what they already owe.
“I’ve seen people think they’re doing great throughout the year, only to realize, come tax time, that they owe tens of thousands of dollars because no one is withholding taxes for them,” she said.
Unlike W-2 employees, freelancers don’t have taxes automatically taken out of each payment. That means it’s easy to underestimate how much you owe until April — at which point penalties and interest may already apply. To avoid this shock, understand that you can’t take the same approach as a W-2 employee who has taxes withheld. You’ll need to strategize.
2. Stop Treating Freelance Income Like a Paycheck
According to Szamet, one of the most common mistakes freelancers make is treating their income like a traditional paycheck.
“There is no withholding, which means if you’re not putting money away from every single payment, then you’re already behind,” she said.
Fortunately, this mistake is also preventable. Szamet recommends setting aside roughly 25% to 35% of your income for taxes, depending on your earnings, state taxes and business expenses.
3. Pay Quarterly Estimated Taxes
Freelancers can be in for a rude surprise if they miss or underpay their estimated taxes. If that happens, things can snowball fast, Szamet says. She’s clear that freelancers generally don’t get to wait until April to pay their taxes — and the IRS doesn’t see quarterly payments as optional.
“They’re expecting you to pay throughout the year,” she said. “If you don’t, then you’re going to pay underpayment penalties in addition to everything else.”
For most freelancers, estimated tax payments are due four times a year, typically in April, June, September and January. Missing those deadlines can turn a manageable tax bill into a costly surprise.
4. Recalculate Every Quarter Based on Actual Earnings
As a freelancer, you’re hardly surprised by income fluctuations from month to month — but that unpredictability can make tax planning harder. Projections you make in January may not reflect what you actually earn later in the year.
“The best advice for freelancers with fluctuating income is to recalculate every quarter based on what you’ve actually earned, not what you thought you’d earn in January,” Szamet said. “It’s a lot of extra work, but it’s worth it to avoid surprises.”
5. Don’t Forget Self-Employment Tax
Many freelancers underestimate how much they’ll owe because they overlook self-employment taxes. To mitigate the impact of these taxes on your overall income, Szamet has a commonsense suggestion — factor those taxes into your rates with clients.
“Not only are you paying income tax, but also the employer portion of Social Security and Medicare,” she said. “If you’re not factoring those into your rates, then you’re essentially being paid less than your worth.”
6. Know How You’re Classified
Szamet also warns that freelancers may be surprised by how they’re classified. While parsing out these distinctions might not seem like a big deal, she assures you that it is.
“From a legal standpoint, if you’re being classified as an employee but are being paid as a contractor, then you’re paying taxes that shouldn’t be your responsibility,” she said. “This is something worth paying attention to, especially with worker classification becoming an increasingly litigated issue.”
If you suspect you’ve been misclassified, it's a good idea to consult a tax professional or employment attorney before you file.
The Bottom Line
Freelance life comes with a lot of flexibility — and its fair share of surprises. But if you follow Szamet’s practical advice, you can reduce the number of negative surprises around your taxes.
“The bottom line is this: Freelancers are businesses,” she said. “If you don’t pay attention to your taxes now, then the IRS will make sure you pay attention to them later.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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