How Do Taxes Work for Freelancers in California?
This is part of our general Guide to Laws for California Freelancers.
Since freelancers are a simple type of small business, the way taxes work for freelancers is essentially the same as other small business. This page is thus a simplified version of the guide to taxes for small businesses. It applies to businesses with a single owner who do not have a C corporation. If either of these do not apply to you, see our full Guide to Taxes for California Small Business.
Businesses in California must pay income taxes, which includes federal income tax, as well as state and local income taxes. And if you sell any goods or products (does not generally include services), you must collect sales tax from your customers and send this to the government.
For more on federal income taxes for freelancers, see our Guide to Taxes for Freelancers in the U.S.
What are the income taxes for California freelancers?
The Franchise Tax Board (FTB) is the agency that collects income taxes from businesses in California (It’s like the IRS of California).
A business in California is taxed differently depending on which tax treatment it has. Typically, freelancers will be taxed as one of the following:
- Sole proprietorship
- LLC
- S corporation
How do taxes work for a California sole proprietorship?
For a California freelancer operating as a sole proprietorship (which happens when the business does not have a corporation or LLC), the freelancer is simply taxed on the profits of the business. The filing and payment of these taxes are done as part of the personal taxes of the business owner, on a form called Schedule C.
There is no separate business tax filing, and no minimum franchise tax for California sole proprietorships (unlike for LLCs or corporations).
How do taxes work for a California LLC?
For California freelancers operating through an LLC (taxed as a sole proprietorship for single owners), there is an annual minimum franchise tax of $800, paid to the California FTB.
In addition, if the LLC is taxed as a sole proprietorship, the owner of the LLC pays personal taxes on the profits of the business (using Schedule C).
If the LLC is taxed as an S corporation, see below.
How do taxes work for a California S corporation?
California freelancers taxed as an S corporation are generally taxed by the FTB at 1.5%, or a minimum tax of $800. In addition, the S corporation issues the owner a Schedule K-1 (Form 1120-S) showing this profit (or loss). The owner of the S corp pays personal taxes on their share of the profits of the business (using Schedule E).
What are the local income taxes for California freelancers?
As freelancers are a small business, most cities and counties in California require you to have a business license (aka business tax certificate), which is how they collect taxes from businesses. But often there are exemptions for small business. See our Guide to Business Licenses and Registration in California.
When do California freelancers pay taxes?
State taxes are typically due the same time as federal taxes. See our Guide to Taxes for Freelancers in the U.S. Local taxes may be due at different times, so check with your local government.
Further Resources
Guide to Taxes for Freelancers in the U.S.
Guide to Deductions for Small Business
Guide to the Law for California Freelancers
Guide to Tax Controversies and Disputes
Tax Treatments for Small Business
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