Filing and paying taxes can be a confusing and daunting task for those who are self-employed. Unlike employees, who have taxes directly withheld from their paychecks, self-employed individuals are the ones responsible for filing and paying taxes on their income. Understanding the basics of tax obligations for the self-employed can make this process less overwhelming. In this blog post, we will discuss tax requirements for self-employed individuals, strategies for staying on top of taxes, and the benefits of hiring a certified public accountant (CPA).
Tax Requirements for the Self-Employed
All self-employed taxpayers are required to pay two different taxes. First, self-employed individuals are responsible for paying self-employment taxes. The self-employment tax rate stands at 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare.
In addition to self-employment taxes, the self-employed are responsible for paying income taxes on their earnings. The amount of income taxes you owe will depend on your income level and deductions. Deductions can include business-related expenses such as office supplies, equipment, and travel.
How to Stay On Top of Taxes
Without proper planning, it’s easy for those who are self-employed to fall behind on their taxes. This can lead to serious consequences, ranging from fines to criminal penalties. Read our blog post, “Delinquent Tax Returns and the Consequences You Could Face,” for in-depth information about the repercussions of falling behind on tax payments.
The best way to stay current on your taxes is to make quarterly estimated tax payments throughout the year to the IRS. This is calculated based on your estimated profits for the quarter. Staying up-to-date with bookkeeping is extremely important in order to accurately calculate your estimated tax payments.
Benefits of Hiring a CPA
Even with the best intentions, self-employed individuals can still make mistakes when it comes to taxes. This is where hiring a certified public accountant (CPA) can be extremely beneficial. A CPA can help you stay current on your taxes through tax planning, help you navigate the complex tax laws that apply to the self-employed, and ensure that you are taking advantage of all the deductions and credits available to you.
If you are self-employed and in need of accounting services, contact Larry Bradford today. Larry is a seasoned professional, with over 35 years in practice as a CPA. His expertise and knowledge can help you stay on top of your taxes while also minimizing any potential risks and penalties. Call 512-402-0049 or send an email to firstname.lastname@example.org to schedule an appointment.