How to File Self-Employment Tax

There are many factors to consider when filing self-employment tax. The amount of profit you generate for your business will be a key factor in determining the amount of self-employment tax you have to pay. You can deduct business expenses from your income, and the remaining amount will be your net profit. On the other hand, if your expenses exceed your income, you will have to pay more than you earn.

Form 1040-ES

The IRS provides a Self-Employment Tax Form for people who own their own business. This form calculates your estimated taxes for the current year, as well as for the previous year. It’s used to pay self-employment tax and income taxes. Depending on your personal circumstances, you might not owe taxes at all, but you will need to file the form anyway.

Job exempted from self-employment tax

If you earn more than $400 in a year from your job, you are considered a self-employed person and must pay self-employment tax. There are several different types of self-employment, including sole proprietorships, limited partnerships, and partnerships. You must file Form 1040-ES to report your income if you earn more than this threshold. However, if you are a member of a church or a religious organization, you may be subject to self-employment tax.

Business deductions

There are many ways to claim business expenses on your self-employment tax return. Business expenses can include interest paid on business credit cards, but not on personal purchases. To maximize your deductions, use a dedicated credit card for business expenses only. Internet and phone expenses can also be claimed as a business expense. If you make calls on your own cell phone for business purposes, keep detailed records of the percentage of time the call was made on your business phone.

Estimated taxes

If you’re self-employed, you have to pay estimated taxes in four installments beginning April 15. Each payment is based on the number of months you earn income. If you don’t earn income during any of those months, skip the April 15 and June 15 payments. Estimated taxes are paid to the IRS via a safe harbor method, which means the IRS won’t penalize you if you don’t pay them in full.

Social Security and Medicare taxes

While an employee pays the employer share of Social Security and Medicare taxes, the self-employed are responsible for their own contribution. This tax is 15.3% of their net earnings from self-employment. The self-employed portion is based on the amount they earn up to the annual threshold. Self-employed taxpayers can also claim deductions for health insurance, retirement accounts, and professional services. However, self-employment has its unique set of rules, so knowing them can make filing for taxes easier.