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Health Insurance For Self Employment Article
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Choosing to Pay the Self Employment Tax Quarterly
from:As someone in the United States who has chosen to take the route of self employment, taxes are assessed at double the rate of regular wage earners. It seems unfair, but the IRS usually collects taxes from both employee's wages and the employer, so they feel justified in treating you as both, as far as the accounting goes every April 15th.
These payments are estimated against the amount of self employment tax you think you'll owe at the end of the year. You can make that estimation by making something of a dry run through your taxes before the first quarter filing date. Just fill out the duplicate from last year's form and quadruple the numbers you have thus far.
Assuming you'll want to take itemized deductions, you are able to take a great many deductions (with receipts) being something like half a business as far as the self employment tax is concerned. If you know there'll be large business expense sometime in the year figure that in, too. If you owe tax, the IRS requires that you pay your self employment tax in quarterly installments every three months.
Since the expense of the double-taxation is often more than offset by major deductions during the start-up and expansion phases of a new business venture, you may not estimate that you owe anything. In that case, you don't have to send any money in. Unless you're likely to be audited, if it seems close, you don't have to worry about the quarterly payments. Your accountant will likely have a margin of error he or she works with in such cases.
That said, you only have to file once per year. The specific type of form you need to file differs by how your company is organized, if you have employees, the places you do business, and a seemingly endless number of minor factors depending upon the nature of your work. If the answer doesn't seem very clear from your first perusal of the IRS website, you might do well to talk to an accountant, preferably one who specializes in self employment tax issues.
You no longer have to file as self-employed when you incorporate your business, though it depends upon the nature of your involvement in the incorporation and how it was set-up, as well as how it is currently being run. If you serve as the chairperson or executive officer of a full corporation or a limited liability corporation (LLC), you may still be required to file forms for self employment. Tax laws sometimes require a bit of a judgment call that is further complicated when large sums of money are involved, so again, calling an accountant is often a good way to save as much as 7% of your gross income from taxation.
Most people who are self employed that turn a profit pay estimated self employment tax each quarter, assuming they'll turn a profit.
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