More and more people are opting for a self-employed lifestyle. But what does that mean when it comes to your tax responsibility? In this article, I’m sharing some basic facts about what to do about self-employed tax.
Being self-employed doesn’t mean you don’t have to pay taxes. It means you are responsible for paying the tax out of your earnings yourself, rather than a corporation paying payroll taxes on your behalf. You need to document income and expenses to ensure you are both paying your tax and getting the appropriate credits and deductions.
For most, paying your taxes quarterly is more affordable than paying your taxes when you file your federal income return. This ensures that a portion of the tax is paid to the IRS 4 times through the year. Keep good records of your income and expenses, and be prepared when it’s time to file your quarterly taxes or annual tax returns.
Paying Self-employed Tax for Federal Filings
It doesn’t matter if you are a full-time freelancer or just do a few side jobs from time to time to get the extra cash you need to file IRS Form 1040 to report the income you paid yourself from the freelance income. It doesn’t matter if your business is in a local shop, you work out of your home, or you have an online business you need to include any income earned that is $400 or more. That means all jobs combined are $400 or more.
Essentially you own a business, even if you are the only employee. And as such, you will use Schedule C to report your business income and expenses and Schedule SE to determine how much tax you owe on the business income.
Are Business Expenses Deductible for a Self-employed Business?
Your self-employed business is eligible to claim certain expenses that can serve as a write-off on your tax return. You may be able to claim office supplies, travel expenses, your home office, and even your utilities.
There are several categories of business expenses such as business insurance, on-the-job meals, advertising costs, ongoing education related to your business, service fees, and others. We’re always happy to help self-employed and small business owners manage their bookkeeping needs as well as annual tax returns.
This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.