Self-employment taxes can be complex and confusing, especially for freelancers and independent contractors. However, it is important to understand your self-employment tax obligations to ensure that you comply with the law and avoid penalties. Our experts at Performance Financial help break down essential tips you must know before filing taxes as a self-employed person or a freelancer.
What Are Self-Employment Taxes?
Self-employment taxes are taxes paid by self-employed individuals. These taxes include Social Security and Medicare taxes. Self-employed individuals are responsible for paying both their employer's and employee's share of these taxes.
Who Is Required to Pay Self-Employment Taxes?
If you are self-employed and earn over $400 in net income from your business, you must pay self-employment taxes. This includes sole proprietors, independent contractors, and freelancers.
How Do I Calculate My Self-Employment Taxes?
To calculate your self-employment taxes, you will need to subtract your business expenses from your gross income. This will give you your net profit. You will multiply your net profit by 15.3% to calculate your self-employment tax liability.
When Are Self-Employment Taxes Due?
Self-employment taxes are due quarterly. You can make estimated tax payments throughout the year or pay the entire amount when you file your tax return.
How Can I Reduce My Self-Employment Taxes?
There are several ways to reduce your self-employment taxes. One way is to deduct business expenses from your income. You can also deduct the cost of health insurance and retirement contributions.
Additional Freelance and Self-Employment Tax Tips
In addition to the information above, here are a few other things to keep in mind about self-employment taxes:
- You can deduct the cost of health insurance and retirement contributions from your self-employment income.
- You may qualify for the self-employment tax deduction if your net profit is less than $160,000.
- You can make estimated tax payments to avoid a large tax bill at the end of the year.
- It is essential to keep accurate records of your income and expenses.
By following these tips, you can ensure that you comply with the law and pay the correct amount of self-employment taxes.
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How Can Performance Financial Help?
Performance Financial is a CPA firm helping small businesses and individuals with their tax needs. We can help you calculate your self-employment taxes and ensure you comply with all tax laws. We can also provide tax planning advice to help you reduce your tax liability.
Here are some of the benefits of working with Performance Financial:
- We are experienced in helping small businesses and individuals with their tax needs.
- We are committed to providing our clients with high-quality service.
- We are always up-to-date on the latest tax laws and regulations.
- We can help you to identify tax-saving opportunities.
- We can help you to prepare and file your tax returns.
Contact us today to learn more about how Performance Financial can help you with your self-employment taxes.
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