Do Self-Employed People Pay Taxes?
- Self-employed people pay the same taxes as those who work for a company. Instead of paying them with each paycheck, self-employed people need to pay them at the end of the year or quarterly. The IRS recommends that you pay quarterly taxes after you have been self-employed for the first year.
- When you pay quarterly taxes, you are paying estimated taxes based on the predicted amount you will need to pay over the year. Your accountant can help you figure out how much you need to pay each quarter or you may be charged penalties for late payments. The taxes are due April 15, June 15, Sept. 15 and Jan. 15. The date may change if you it falls on a weekend. Form 1040 ES can help you figure out the amount you should pay each quarter. You can adjust if you make more or less than you originally estimated. You can pay the taxes online or mail in your payments.
- In addition to the income taxes, you will need to pay a self-employment tax. When you work for an employer, the employer will pay for half of your Social Security and Medicare taxes, but the IRS requires you to pay for both halves when you are self-employed. A percentage of self-employment tax can be deducted from your adjustable gross income when you file your taxes.
- The first year you are self-employed it will be worth using an accountant to file your taxes. He can explain which business expenses are deductible and which are not. He can also teach you how to figure out your estimated taxes for the next year. An accountant can help you save money by finding all the credits you qualify for. You can save money by claiming business expenses such as rent, advertising, office supplies and travel. You should only claim expenses that you truly qualify for.
