What taxes do I pay if I’m self employed?
Ever dreamed of working for yourself? Starting up a sole prop and running your own show? Those dreams could become a reality if you are self-employed.
Not sure if you’re self-employed? Check out the IRS regulations here.
Income tax + Self-Employment Tax
These are the personal taxes you need to be worried about as someone who is self-employed. They are also included as part of your personal tax return, Form 1040. For taxes that apply to your business itself, it’s always a good idea to consult a tax advisor.
Income tax can vary based on your withholding allowances and filing status. Check out Form 1040 to learn more.
Self-employment tax includes Social Security and Medicare, which together take about 15.3 percent of your earnings. Whether you work for yourself or are a typical full-time employee who works at a company, you likely have to contribute towards Social Security and Medicare. The big difference, however, is that when you’re employed, your employer splits the Social Security and Medicare taxes with you. When you rely on your own income, you’re responsible for the full 15.3 percent.
And there you have it - the two taxes to remember when you are self-employed. Now go forth and be your own boss!