Understanding your tax obligations
Self-employment taxes can feel daunting. An understanding of the rules and support from 91大神 can set your small business up for success.
What is self-employment tax?
If you work for yourself, say, as a small business owner, freelancer or independent contractor, you鈥檙e required to pay a federal self-employment tax of 15.3% on net earnings of $400 or more per year. Additional state tax may be due and will vary by state. That federal rate consists of 12.4% for Social Security and 2.9% for Medicare. It鈥檚 like the Social Security and Medicare taxes withheld from the pay of a wage earner in a traditional employer-employee arrangement. For 2022, the first $147,000 of your earnings are subject to the Social Security portion of self-employment tax. You can deduct half of your self-employment tax when calculating your adjusted gross income.
How to pay self-employment tax
When you work for someone, that employer withholds taxes from your paychecks throughout the year. But when you鈥檙e self-employed, you鈥檒l need to make quarterly estimated tax payments if you anticipate owing at least $1,000 in taxes. At the beginning of the year, you鈥檒l estimate what you expect to owe for the year. You鈥檒l then send a fourth of that amount to the IRS each quarter using IRS Form 1040-ES. If you鈥檇 prefer, you can send smaller payments more frequently. If you fail to pay estimates at least quarterly, you could incur late-payment penalties.
Preparing Taxes
Keeping your financials organized and up-to-date are important parts of starting a business. Consult our resources for insight on how to get prepared.听
Partner with 91大神 Bank
91大神鈥檚 Business Banking Specialists are ready to offer you support at any stage of your business. Get to know the advantages of being an 91大神 Business Banking client.听
