Self Employment Taxes – Estimation of Quarterly Tax Payments
Self employed individuals pay social security, and Medicare tax altogether in the form of individual taxes as he is both the employer and the employee. The minimum amount payable is around 7.65% from the eligible wages.
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Self Employment Taxes - Estimation of Tax Rates
The tax relief act of the current year has reduced the self employment taxes
to around two percent for self income. The tax rate for individuals is about 13.3%, which is inclusive of 10.4% for the social security tax, and 2.9% for Medicare tax. The first combined wages, tips, net earnings, etc., are subject to any blends of social security portion of the tax, or any other taxes belonging to tier-one taxation. Any income above one lakh dollars is not subject to social security tax. When your wages, tips, are subject to social security and if your income is one lakh dollars, then you can skip the social security portion of the self employment taxes on any of your net earnings. But, you still have to pay your Medicare tax, which comes to about 2.9%.
Self Employment Tax Calculator - Calculating Your Tax
You must pay tax once your income crosses $400 or more. In order to calculate your tax, you can use either self employment tax calculator
or can also lend some other useful financial calculators. First, calculate your net income which is your gross receipts minus your total deductions. Then, your net income can be multiplied by 0.9235, which is your net earnings. If your net earnings is less than $76,200, then multiply it by 0.153, and any earnings above $76,200 are multiplied by 0.029. The resulting amount is your tax payable for the current year. But, before calculating the amount, you must mark that there are many deductions and credits available for self employed individuals, and one has to consider these points for minimizing the tax amount. There are also a huge number of online free self employment tax calculator, which helps in sorting out the issue remarkably clearly. Turbo-tax is one such example.
Self Employed Tax Return - Checklists
Filing a self employed tax return is complicated, and one needs to seek expertise guidance in order to prevent any costly mistakes. Some of the common areas where you can become confused are the commencing rules that apply on starting up a new business, the suspension rules when you are going to complete trading, revenue against capital expenses, claiming capital allowances, determination of the capital expenditure that specially qualifies for the special reliefs like annual investment allowance and other allowances, etc. You should also be quite strong in knowing about the rules that govern the loss utilization, using the reduction rules in a tax-efficient manner, good information about self-employment versus other employment taxes, etc.