Taxes for the Self-Employed

If you live in the United States and you’re self-employed, you’re really going to feel the pinch when tax time comes around. When you’re employed in a traditional job, your taxes are taken out a little each week. This makes it seem a little easier. When you’re self-employed, you have to pay personal taxes as well as business taxes, and you have to pay it in larger chunks. This is pretty difficult to stomach!

Of course, self-employed people can take a lot of deductions, too. You can deduct things like part of your rent and utilities if you work at home, business expenses like equipment and supplies, and things like domain names and hosting.

The self-employment tax applies to anyone who makes more than $400 per year. When you are employed traditionally, your employer pays part of your taxes, and you pay the rest. This is typically 7.65% of your income paid by your employer and 7.65% by you. If you are self-employed, you have to pay the entire 15.3%. 12.4% goes to Social Security, and 2.9% goes to medicare. These numbers may vary depending on how much you make, but most self-employed people will fall into this bracket.

You’ll have to pay estimated tax payments quarterly. This is due in April, June, September, and January. If you don’t pay these on time, you’ll have to pay some pretty stiff penalties.

I highly advise that you handle a qualified accountant to help you keep your books and records in order and to help you with your taxes.

Many accounts are relatively inexpensive, and they will save you an unbelievable amount of time and money. They will make sure you pay the amount of taxes you really owe and not a penny more, and they will make sure you pay on time. They’ll also make sure you keep your records in order so you’ll have that information available if you’re audited later.