Call Us Today 810-355-4851 or 888-351-8395
Menu / Navigate
Secondary Nav

Three tips to avoiding self-employment tax pains

The holidays are often the favorite season of many around the country. After the holidays rest a four-month long season that is a favorite among tax professionals - tax season. While it is an opportunistic time of year for everyone in the tax industry, it is often loathed among independent contractors and the self-employed.

Individuals who are self-employed often dread tax season because it is finally the time of year to pay up on Social Security and Medicare taxes, which are calculated near a rate of 15 percent of income throughout the previous year. No matter if you're self-employed or a W-2 employee, taxes are an obligation we must pay.

Tax season doesn't have to be a chore with these four self-employment tax tips from the Internal Revenue Service:

1. Income is still taxable even without the form

You should receive a Form 1099-Misc if you made more than $599 from a company as an independent contractor. This form is used to report miscellaneous income. However, even if you make less than the $599 threshold from a company, your income is still taxable.

Self-reporting income of less than $599 is the easiest way to avoid an audit or further legal trouble down the road.

2. Pay in portions throughout the year

Self-employed individuals can calculate their estimated yearly tax obligation using a Form 1040-ES.You can then use the number found through this calculation to pay estimated quarterly taxes to the IRS. This method can help you avoid a larger burden when it is time to file your taxes. Further, the IRS may impose a small penalty if you do not pay quarterly.

3. Use separate bank accounts and workspaces

You are more likely to be audited by the IRS if you are self-employed. To have a clear and distinct paper trail of your expenses, use a checking account or credit card specifically for work-related expenses.

Secondly, even if you work from home, you should designate a separate office space. This can be as easy as having a two-bedroom apartment and turning one bedroom into an office.

Remain in control of your income

Self-employed individuals enjoy what they do because it provides for a flexible schedule and independent lifestyle. Through regular self-reporting of income and quarterly tax payments, independent contractors can relieve some of the burden felt during tax season.

No Comments

Leave a comment
Comment Information

Contact the Firm

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Law Offices of Angelique M. Neal, PLC
720 W. Grand River Avenue
Brighton, MI 48116

Toll Free: 888-351-8395
Phone: 810-355-4851
Fax: 810-225-4146
Brighton Law Office Map