Tax filing window for 2023 is now open. Last Date: April 15 ⏰

Tax filing window for 2023 is now open. Last Date: April 15 ⏰

The Financial Lives of America's 59 Million Freelancers and Self-employed*

Accelerated by the Covid-19 crisis, the US freelance workforce continues to grow. Freelance workers pumped $1.3 trillion worth of annual earnings into the U.S. economy in 2021, $100 million more than the year before. 59 million Americans** do freelance work for at least some of their income, making up 36% of the entire labor force.

With no sign of the trend slowing, we wanted to find out what financial life is really like for American freelancers and self-employed people. So, we took a look at the latest industry-wide IRS data, as well as data from users of the FlyFin A.I. tool, to see some of the trends, averages and data points that impact freelancers' lives most.  

*Sole-proprietors (self-employed, independent contractors, salaried employees with a side hustle) and business owners (LLC, LLP, S-Corp, etc.)

**Upwork


We looked at some of the largest groups of freelancers to find their income in 7 major industries. Here's what they earned on average.

On an average freelancers of various professions have earned the following amount. 1. Construction workers: 3.04M Construction workers filed taxes, according to IRS data on an average they earned $96,633 in 2019.  2. Retail and online sellers: 2.67M Retail and online sellers filed taxes, according to IRS data on an average they earned $78,822 in 2019.  3. Healthcare professionals: 2.18M Healthcare professionals filed taxes, according to IRS data on an average they earned $84,856 in 2019.  4. Real estate agents: 2.18M Real estate agents filed taxes, according to IRS data on an average they earned $84,856 in 2019.  5. Knowledge workers: 2.18M Knowledge workers filed taxes, according to IRS data on an average they earned $113,702 in 2019.  6. Rideshare & delivery drivers: 2.18M Rideshare & delivery drivers filed taxes, according to IRS data on an average they earned $50,048 in 2019.  7. Arts & Ent / Creators: 2.18M Arts & Ent / Creators filed taxes, according to IRS data on an average they earned $30,706 in 2019.

The highest-earning freelancers shared a handful of characteristics. We found what percentage of the freelancer workforce those most-common markers made up.


Without the right tools and guidance, many freelancers and self-employed individuals overpaid on their taxes.

tax overpaid by freelancers in 2022 is $3019 as per IRS 2022 data

These are the categories in which FlyFin found the most expenses for all of its users.


Self-employed people using the FlyFin A.I. tool identified the following most common business expenses from which they were able to make tax deductions.


The most common tax questions users had for FlyFin CPAs in 2021 were about what qualifies as a deduction. Here’s a snapshot of the expense categories they asked about most.


FlyFin users who were surveyed identified the most important actions they took – or failed to take – that cost them money when they filed their taxes.

Top 5 mistakes freelancers make around tax filing: Lack of awareness around Estimated Taxes: Freelancers who didn’t pay their quarterly taxes ended up with huge tax dues.

Freelancers who deducted business meals from their taxes had most of those meals at restaurants that are set up for people on the go.


Self-employed individuals and freelancers who traveled for work used these vendors the most for airfare, hotels, short trips and more.


FlyFin freelancers and self-employed people who used a home office in 2021 spent the most on office supplies from the vendors below.


Methodology
These figures are based on data from the IRS' 2019 Sole Proprietorship Statistics data set and on a study of the top tax write-offs by 60,000 freelancers in 2021, conducted by FlyFin AI Inc.

The latter included data from a smaller set of compensated study subjects who earned at least $600 from their 1099 independent contractor jobs in 2021.


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