When you’re self-employed, navigating the tax landscape can seem daunting. However, with some guidance and understanding, you can successfully file your self-employment taxes without losing your sanity. Here at Clearview Accounting, we’re all about making numbers your friend, so let’s demystify self-employment taxes.
Self-employment taxes are primarily made up of Social Security and Medicare taxes. When you’re an employee, your employer pays half of these taxes, and you pay the other half. However, when you’re self-employed, you’re responsible for the entire amount. As of my knowledge cutoff in September 2021, the self-employment tax rate is 15.3%.
You must pay self-employment tax and file Schedule SE (Form 1040) if either of the following applies:
To figure out your net earnings from self-employment, you will subtract your business expenses from your business revenues. These calculations are done on Schedule C (Form 1040), Profit or Loss from Business.
As a self-employed individual, generally, you’re required to pay estimated taxes quarterly, not just yearly. These payments include both your income tax and your self-employment tax. The IRS provides Form 1040-ES for you to calculate and pay these taxes.
The good news is that you can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income. This deduction only affects your income tax, not either your net earnings from self-employment or your self-employment tax.
Also, self-employed individuals can deduct business expenses, health insurance premiums, and in some cases, contributions to a self-employed retirement plan.
You’ll report your self-employment income and expenses on Schedule C or C-EZ (Form 1040). The calculated net income from Schedule C is then transferred to Form 1040 to calculate income tax and to Schedule SE to calculate self-employment tax.
Self-employment taxes can be a complex subject, but they don’t have to be intimidating. With a little planning and organization, you can accurately file your self-employment taxes and keep more of your hard-earned money in your pocket.
At Clearview Accounting, we’re here to help you gain a clear view of your financial situation and guide you on your path to success. Have questions? We’re the friendly accountants who are always ready to help!
At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there.
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7530 N. La Cholla Blvd., Tucson, AZ 85741
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At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there. With over 20 years of experience serving hundreds of business owners like you, our team of experts combines financial expertise and proactive communication with our drive to help each client achieve results and have fun along the way.
Here's how we do it:
Discover: We start with a consultation to understand your specific goals, what's holding you back, and what success looks like for you.
Strategize & Optimize: Together, we design a customized strategy that empowers you to progress toward your goals, and we optimize our communication as partners.
Thrive: You enjoy a clear view of your business and your financial prosperity.
Schedule a consultation today, and take the first step toward being able to focus on your core business again without wondering if your numbers are right- or what they mean to your business.
In the meantime, download, "The Business Owner's Essential Guide to Tax Deductions" and make sure you aren't leaving money on the table.
