Self Employment Taxes
Are you starting your own business? Then get ready to pay the Self Employment Taxes. Our professionals who work on Self Employment Taxes will provide everything you need in order to prepare your tax return, make smart tax decisions, and get your biggest tax refund. Your have started a business, which means you have also freed yourself from the daily grind of that old job. But there is no freedom from paying taxes. In fact, you will now owe tax that you never had to pay as an employee. The self-employment tax (officially known as the SECA tax for Self-Employment Contributions Act tax) is the self-employed person’s version of the FICA (Federal Insurance Contributions Act) tax paid by employers and employees for Social Security and Medicare, and it’s due on your net earnings from self-employment.
What is the Self Employment Tax?
Several newly self-employed people – sole proprietors, independent contractors and the like – are surprised at their tax bills at the end of the year because they notice they’re suddenly paying a lot more in tax as a self-employed person than as an employee. That’s because they’re carrying the full burden of paying for their Social Security and Medicare.
When you’re an employee, you share that cost with your employer, with each of you paying a share of the FICA tax. When you’re self-employed, though, you’re stuck with the full full amount yourself.
tax is divided into two parts:
12.4 percent for Social Security. If you earn more than that (from self-employment or, if you also have a job, from the combination of your job and your business), then the 12.4 percent part of the tax that pays for Social Security stops for the year.
2.9 percent for Medicare. The Medicare portion of the self-employment tax doesn’t stop. No matter how much you earn, you’ll pay the 2.9 percent Medicare tax. For more information on this tax, see IRS Tax Topic 554: The Self-Employment Tax.
How do I report the self-employment tax?
Of course, a new tax requires new paperwork also. When you start a small business and you do not incorporate or form a partnership, you report the results of your operations on Schedule C and file it with your Form 1040.
You calculate your self-employment tax on Schedule SE and report that amount in the “Other Taxes” section of Form 1040. In this way, the IRS differentiates the SE tax from the income tax.
Good News About Self Employment Taxes
The good news is that you do have your own business, which is a plus for your own personal life. And although you unfortunately have to deal with Self Employment Taxes, our professionals are dedicated and here to help. Call 305-387-5880 today.