Self-employment tax is not really a new tax that has to pay once you start your own business is a continuation of Social Security and Medicare that be paid as an employee, but with a variation.
The employees have social security and Medicare taxes withheld from their paychecks as FICA deductions, (Corporation Federal Insurance Contributions Act). You, as a self-employed person must pay these taxes at the time tax. (Also note that tax time appears four times a year through estimated tax payments for self-employed.)
It is essential to remember that self-tax work is completely independent of their federal income tax.
Who should pay?
In general, you must pay SE tax and file Schedule SE (Form 1040) if any of the following situations.
* If your net earnings from self-employment are $ 400 or more.
* If you work for a church or qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $ 108.28 or more in wages from the church or organization.
How can I do this?
You determine your self-employment taxes at the time that determine their income tax. His self-employment taxes are calculated on Schedule SE, which is then entered on Form 1040. Any amount you must self-employment tax, adds to his personal tax liability for the current year and paid to the IRS.
Also remember that self-employment tax is to be included in your income tax submissions four times a year. If you expect a profit of one year, must pay their taxes, so the estimates of income and self-esteem that the combined use of taxes.
Employment self tax rate.
The rate of self-employment tax is 15.3%. The rate consists of two parts: 12.4% for social security and 2.9% for Medicare.
Maximum earnings subject to self-employment taxes.
Only the first $ 106,800 of their combined wages, tips, and net income is subject to any combination of the 12.4% social security part of self-employment tax.
All your combined wages, tips, and net income are subject to a combination of the 2.9% Medicare tax for self-employment.
If you are also an employee.
If you are an employee, and self-employed in their own business, you are still obligated to pay a tax of self-employment. Social security and Medicare taxes on their income of the employees are always treated as FICA withholding on your paycheck.
However, you must pay these taxes at the of net income derived from their own business.
Self-employment tax deduction.
You can deduct half of their tax self-employment when calculating your adjusted gross income. This deduction is only on their taxes. This does not affect your net earnings from self-employment or your tax self-employment.
Self-employed workers can deduct 100% of the cost of health insurance premiums from their taxes income tax. However, the self-employed can not deduct any of the health insurance costs in calculating their self-employment tax liability.
More information.
Of course, the IRS has more about this if you want to try it. The schedule can be found here ARE target = "_blank" href = "http://www.irs.gov/pub/irs-pdf/f1040sse.pdf% C2% A0"> http://www.irs.gov/pub/irs-pdf/f1040sse . pdf The instructions are here http://www.irs.gov/pub/irs-pdf/i1040sse.pdf
By Please Note:
I am not a lawyer, nor am a CPA. I just need to know about things, so do some research and then share what I've learned so that others can also benefit. My goal is to provide an overview, or a place to initiate its own investigations. Note that the Tax laws can and do change from year to year. For real bona fide tax advice please find a tax attorney.
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