How to Handle Taxes When You’re Self-Employed

What is Self-Employment? Read more

As a self-employed individual, you are considered a business owner or freelancer who earns income from a trade or profession. This income is typically reported on a Schedule C (Form 1040), and you are responsible for paying self-employment taxes, which include both the employer and employee portions of payroll taxes.

Key Tax Obligations Read more

As a self-employed individual, you are required to report your income and pay taxes on a quarterly basis using Form 1040-ES. This form is due on April 15th, June 15th, September 15th, and January 15th of the following year. You are also required to file an annual tax return (Form 1040) by April 15th, which includes reporting your business income and expenses, as well as paying any additional taxes owed.

Business Expenses Read more

As a self-employed individual, you are allowed to deduct business expenses on your tax return, which can help reduce your taxable income. Common business expenses include equipment and supplies, travel expenses, and business use of your home. Be sure to keep accurate records of these expenses, as they can be difficult to prove if audited.

Self-Employment Tax Read more

As a self-employed individual, you are responsible for paying both the employer and employee portions of payroll taxes, which includes Social Security and Medicare taxes. This means you will pay a total of 15.3% in self-employment taxes, which includes 12.4% for Social Security and 2.9% for Medicare. You can deduct half of this amount as a business expense, but you will still need to pay the other half.

Tax Planning Strategies Read more

To minimize your tax liability, it's important to plan ahead and take advantage of tax-saving strategies. This may include setting aside a portion of your income in a savings account to pay taxes, or using a tax-deferred retirement plan. You may also want to consider consulting with a tax professional to ensure you are taking advantage of all the tax credits and deductions available to you.

Conclusion Read more

Handling taxes as a self-employed individual can be complex and time-consuming, but it's essential to stay organized and plan ahead. By understanding your tax obligations, taking advantage of business expenses and tax-saving strategies, and staying up-to-date on changing tax laws, you can minimize your tax liability and ensure you are in compliance with the IRS.