How do I file my taxes when I am self-employed? That’s a question that many self-employed workers may be asking themselves nowadays. A self-employed individual can be defined as a sole proprietor, an independent contractor, a member of a partnership that carries on a trade or business, a part-time business worker, or a gig worker that is in business for themself. Self-employed people are generally responsible for filing an annual return and paying self-employment (SE) tax and income tax quarterly. SE taxes are Social Security and Medicare taxes paid by individual workers. Estimating taxes is the method for paying these specific taxes.
But first, an individual must calculate their net profit or net loss from the business. This is done by subtracting the expenses from the income. If the gain outweighs the fees, then there is a net profit. If the costs outweigh the revenue, then there is a net loss. Either the net profit or the net loss must be recorded on Form 1040 or 1040-SR. The next step is filing an income tax return if the individual’s net earnings are more than $400. If it is under $400, it is necessary to check Form 1040 and 1040-SR instructions. Subsequently, estimate the taxes on Form 1040-ES with the assistance of the previous year’s annual tax return. If this is an individual’s first year of self-employment, then they need to estimate the amount of income for the year. If the estimate is too high or low, then recalculate the estimation for the next quarter. The quarterly payment dates for 2022-2023 are April 18, 2022, June 15, 2022, September 15, 2022, and January 15, 2023. Online payments must be made through the Electronic Federal Tax Payment System.
To discover more about SE taxes and other related topics, you can schedule a free consultation with Lakeesha Browne, CPA, here: calendly.com/brownecpa.
“Self-Employed Individuals Tax Center.” Internal Revenue Service, 25 August 2022, https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center. Accessed 4 September 2022.