First year as a full-time freelancer here! I’m loving the freedom, but the tax part has me scratching my head. I live in PA, but I’ve got clients in NY, CA, and TX. I made around $55K total this year, with about $15K of that from out-of-state clients. Now I’m hearing some states may want taxes for income earned there.
I recently came into a bit of extra cash, so I thought about hiring a tax advisor. But I’m not sure if it’s worth the cost or if tax software is enough. For anyone who’s freelanced across states, is it better to hire someone, or can I manage it myself with the right tools?
Any advice on what forms to use or how to split up income by state would be really helpful. I’d love to avoid a tax mess down the line and would appreciate any tips on staying organized without spending a ton.
Honestly, this might be the right time to get a CPA. They can tell you if you need to file in other states and what specific forms or deductions to consider. Even if you just get a consultation and don’t have them file everything, it might be helpful to talk to one.
How tricky or expensive your taxes end up being really depends on how well your records are kept. As a business owner, it’s key to keep track of income and expenses.
You could use a spreadsheet, a DIY program like Xero or QuickBooks, or hire someone. These tools often let you track by client or state if you need to.
You could pay a tax pro for an hour to get an overview, or even to set up your system. It’s worth meeting with someone who’s qualified (like a CPA or tax attorney) to get an idea of what to expect.
It’s a common issue for folks like pro athletes who work in multiple states. Good record-keeping is a must—a CPA can’t do much if your records are a mess.
You didn’t mention exactly what you’re doing for these clients in other states, but your situation isn’t too different from consultants who travel for work. People in consulting, investment banking, etc., face similar challenges.
A CPA might help you figure out what’s needed here.
I was in the same boat last year and spent way too much on help I thought would be useful long-term. Finally found a CPA, who handles my personal and LLC taxes, and helps with my S-Corp stuff. Didn’t realize how much peace of mind it’d give me—happy to pay for it now.
No state income tax in Texas, so you’re good there. CA and NY usually need you to be physically in the state to pay taxes… if you’re working from PA, you’re likely fine.
For records, use digital tools like FreshBooks or QuickBooks—they make it easy to track by client. If taxes feel too complex, a CPA can handle it and help you get the right deductions. I know a few good tax preparers if you’d like a referral.
You might need to file a nonresident return for states where you made income, reporting what you earned from each. If clients issue a 1099, it’s easier to track, but if not, you’ll need your records.
For expenses tied to that income, like travel, you can count them as direct expenses. General business expenses (like office supplies or phone bills) can be split up by the income percentage from each state. On your home state return, report everything. Many states give credit for taxes paid to other states, so no double taxing. Look for a tax preparer with experience in self-employment and multi-state filings, or use tax software if you feel up to it—most can handle multi-state returns.
Definitely think about hiring a CPA, but you might only need to file in your main state.
Usually, out-of-state tax is more for businesses selling products, where you’d be collecting sales tax from buyers in those states. For service-based work, it’s different.
If you make more than $55K next year, consider setting up an LLC and filing as an S-Corp if you’re in this for the long haul.