By and large, being self-employed is great. Now that you re the boss, you get to call the shots: you pick your projects, set your hours, and, when business, is booming, you reap the rewards. But every rose has its thorn. And for the self-employed, tax time can be pretty thorny. When you plant your flag as a freelancer, contractor, or self-employed small business owner, the IRS sits up and takes notice. When you worked for a wage, you hated those little lines of numbers at the bottom of your paycheck why are they withholding so much? but now that you re responsible for keeping track of all your income taxes (not to mention self-employment taxes), you actually miss the good old days of having taxes withheld by your boss. Keep your head up! You left the rat race for a reason, and paying taxes as a solopreneur doesn t need to be any more complicated than it was when you were working for a paycheck. Yes, paying taxes means paying attention, and saving all your receipts is a pain, but in just a few minutes (okay, maybe more like an hour) you can learn everything you need to know to keep the taxman off your back. The first step? Finding out if you need to pay quarterly or annually. Four Times the Fun! (Well, Maybe Not) From the official website of the IRS: As a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly. The IRS defines individuals as self-employed if they conduct business as a sole proprietor or independent contractor, if they are members of a business partnership, or if they earn direct income as a freelancer. As a solopreneur, you need to pay your good ol income taxes as well as self-employment (SE) tax, which represents your contribution to Medicare and Social Security. As you probably know, the IRS loves rules and regulations. And just as they have rules for determining who is self-employed, they have another set of rules to help determine who needs to report and pay their taxes quarterly. Bottom line: if you re self-employed, you probably need to pay estimated tax four times a year. Some individuals may be exempt from reporting quarterly (if your business generated a net loss of income, if you haven t been in business for a full year, or if you have earned less than $600 from your business), but if you ve been up and running for 12 months, and if you re earning an income from your business, then it s time to get to work on your quarterly estimated taxes. Estimates taxes are exactly what they sound like: using last year s return and the worksheet found in Form 1040-ES, you pay approximately one-quarter of what you expect to owe the IRS at the end of the current year. If you overpay, then you ll get a refund when you file your return in April, but if you underpay, then be prepared to fork out extra cash come spring. And most importantly: Make sure that you pay your quarterly taxes promptly. If you report late, the IRS will penalize you at the end of the next quarter, and the penalties can add up quickly. Filing Your Annual Business Tax Return As a self-employed individual you will still need to file an annual return. Yes, this means another round of forms, but look at the bright side: if you ve filed quarterly, this time you won t owe them anything, and you might even get a little something back! Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional. 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Difference 401k & 401a Helpful Tax Tips What is Franchise Tax Home Office Deductions Self Employed Quarterly Tax Filing What Does an SMB Pay in Taxes 50 Tax Deductions Not to Miss Tax Debt Schemes The Facts File for a Tax Extension in 2022 10 Self Employed Tax Tips IRS Is Auditing Your Return How to File Taxes for LLC How To Sell Your Business SMB Tax Deductions Transcript Delivery Tax Deductions For Purchasing Artwork Home Business Tax Deductions Tax Credits As Revenue for Your Business Small Business Federal Taxes End of Year Tax Strategies Self Employed Tax Deductions Owing the IRS 6 Tips Abusive Tax Shelter Info 6 Tax Tips For Self Employed Compare the Benefits of Inc vs LLC Taxes Estimated Taxes Taxes As An Artist IRS W-4 TINs and 1099s Can I Deduct My Hobby? National Internet Sales Tax Bill Estimating Taxes Guide to EIN Numbers Show All The post Filing Taxes When Youre Self-Employed: Quarterly or Yearly? appeared first on ZenBusiness Inc..
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