SELF EMPLOYMENT Tax question?

Delmy Varano: You pay extra because if you were a W-2 employee, you would have paid 7.65% of your pay everyweek through social security/medicare withholdings, and your employer would have paid an equal amount. Since you are a 1099 employee, you pay the employer's share (since you are self employed). One half of the self-employment tax would have been paid by you through payroll deduction if you were a W-2 employee, so that is more a case of pay the same but just pay it later. The only ways to reduce the self-employment tax are: 1. Make sure you take every business deduction you can to reduce your net business income. 2. Put money into a self-employed 401k/IRA plan through Vanguard, Sharebuilder, or other such investment website. You can put up to 20% of your net profits into such a plan and avoid paying self-employed ss and income taxes on them (or at least defer them until distribution when you retire). 3. Work for a company with regular earnings as a side job where your! combined income from the side job and your business is greater than $106,800. The ss tax stops at $106,800 in earnings. Medicare continues on after that amount. 4. If you had a helper/subcontractor, give them a 1099 for the money you upaid to them and take that as a business expense deduction. The one good thing about self-employment is that it is considered earned income for purposes of the earned income credit, so if you have a child, you will probably qualify for the earned income credit to offset some of this tax. If you are still working as a 1099 employee this year, you should sign up to pay quarterly estimated taxes of at least $1,000 a quarter so that you are not caught with a big bill next year....Show more

Sammy Kar: As a general rule, you will be required to file this form if you estimate that you will make more than $15,000.00 at any point during the fiscal tax year, that is why it's called 'estimated tax'. Currently, your ex! penses greatly outweigh your income, but as you beg! in to make money, your income will eventually catch up with your expenses, this is called the 'break even point'. But if your income continues to increase, and your expenses remain more or less the same, you will begin to incur higher federal tax which will have to be paid. This is the nuts and bolts of how quarterly estimated tax payments work. When looking at if from the I.R.S. point of view, one of their criteria is that you are required to pay high fees while filing your tax return, either if you are charging higher prices to your customers and thus higher taxes, or you are simply grossing large amount of money. They require you to pay these fees in four quarterly installments, set evenly throughout the tax year so they can gauge your progress, or the decline of your business. These are from January to March, April to May, June to August ! and September to December. Their fee benchmark starts at $1,000.00 after subtracting all of your expenses and credits, and that your expenses are expected to be less than your earnings. This form is primarily for calculating and paying your medicare and social security taxes, and must be attached to your 1040, it is also a way for the system to monitor your company for anything that it feels might infringe on the rights of others. Sometimes if your are not careful, you can cross this fine legal line, and the I.R.S. will audit your business, by performing an official internal inspection. Once you cross the $15,000.00 threshold, you must move into either a self-employed artist's studio, or your own home, so you do not infringe on the rights of others in the same area of residence, or any managers of that residence! 92.35% of your net earni! ngs is usually subject to self-employment sales tax. The sel! f-employment tax rate for Social Security is 12.4% of your net earnings, and for Medicare it is 2.9%. You should always use form 1040-ES whenever filing taxes to figure out your estimated tax obligations, before it is too late. Additionally, if you make more than $200,000.00 at any point during the fiscal tax year, you will have to be liable for additional Medicare Tax, at a rate of 0.9 percent....Show more

Terrell Lawman: I was asked to be a fill in by a friend when they needed me to work at their office. I did not sign anything nor was I asked for my ss#....so would I file my taxes as self-employed? I get paid less than 5000.00 and I use my car to run errands for them so I can claim mileage as well....

Nannie Kasee: You are self employed or independent contractor. You must file your tax return if your self employed income is $400 or more. You will report your income and business related expenses on s! chedule C or C-EZ (Form 1040). Then you put net income (or loss) on line 12 of Form 1040. This income is subject to SE tax at 15.3% (this is shown on line 57 of Form 1040).

Demetrius Coaster: This kind of stuff can get really complicated sometimes, but since you don't have much income you might be able figure it out yourself. Start with your schedule C, enter your gross receipts or sales. Then deduct all of your businesses expenses. All the ordinary necessary business expenses related to your business can be deducted.However, all personal living expenses CANNOT be deducted. After you finish your schedule C, your net profit or loss, goes on you Form 1040, line 12.That same amount also goes on Schedule SE, Line 2. Read the instructions on IRS for Schedule SE and also just follow the steps.Go back to your Form 1040 and finish that aswell..I hope this helps....Show more

Violette Vanek: As a business owner, you need to make yourself "unstupid" about these thing.Y! !A is not the place to learn.Get a book on starting a businessCheck out! www.irs.gov and your state's tax website.

Kirk Coolbeth: I personally pay monthly, making sure that the 3 months work out to what I owe quarterly. You should have the tax for this quarter paid by April 15th. Check here: http://www.irs.gov/businesses/small/selfemployed/i... for tons of info on Self Employment Taxes.There is a withholding calculator so you can figure out what you're liable for: http://www.irs.gov/individuals/article/0,,id=96196...It's harder to do your first year due to not really knowing what you'll make. I personally would prefer to ballpark it too high than too low....Show more