How To File Self-Employment Taxes

how to do taxes self employed

By Miriam Caldwell. Money in Your 20s Expert

Miriam Caldwell is a freelance writer with a specialty in personal finance. She believes that you can lay a solid foundation by starting to manage your finances in your twenties.

You should talk to an accountant before you do this.If you are considering becoming self-employed. you need to be aware of your tax obligations before you take the step. You can pay your self-employment taxes by following these easy steps.

Time Required: 3 Hours

Here's How:

First, you need to determine how much you need to pay. You can do this by talking to a tax accountant. The accountant can help you determine how much you will owe based on your past earnings or projected profits. Your self-employment tax rate is 15.3% of your profit. This is in addition to your income tax. If you have been in business for a year, you can make quarterly payments based on last year's income. Simply divide what you paid last year by four and pay that much each quarter. Your tax accountant can help you determine if you need to raise or lower this based on your current business projections.

Second, you need to set aside money each month so that you can pay your estimated payment on time each quarter. If this is your first year in business you should set aside at least thirty percent to cover yourself on taxes for

the year.

Third, set up your payment. The IRS allows you make the payments online through the site. You may also mail the payments in. If you fail to make the payments, then you will face stiff penalties. Even if you think the amount you will owe is going to be less than the estimated payment, you need to make the estimated payment.

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Fourth, use your CPA and follow her advice. This is very important, because she will know things that can help you to decrease the amount that you are taxed on. You may be able to deduct your retirement contributions. your health costs and many of your business expenses. This is an important part of making the most of your money .

Fifth, always pay your estimated payment and taxes due. The IRS can access your money and freeze your accounts. You do not want to deal with the headache of owing them back taxes. You should also file your taxes on time each year. If you need to file an extension, you must do so by the deadline. The IRS expects you to pay your estimated taxes when you file your extension, so it is important to set aside the money throughout the year.

If you do need an accountant. you should look for an accountant that you can trust, and who will work with you. YOu can ask family and friends for recommendations.

Source: moneyfor20s.about.com

Category: Taxes

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