Taxes That Must Be Paid By The Self-Employed

9:56 pm Business Planning, Tax Planning

tax wallet empty 150x150 Taxes That Must Be Paid By The Self EmployedIf you are considered as self-employed by the IRS, you are responsible for paying self-employment taxes based on your earnings. The IRS defines self-employment as any business that does not file a business income tax return – including LLCs, sole proprietorships, partnerships and independent contractors.

The biggest tax burden for the self-employed is the self-employment tax. You are required to pay Social Security and Medicare taxes both as employee and employer. If you have over $400 in annual net earnings – which is the profit left over after business expenses are deducted – you’ll owe self-employment tax.

The earnings threshold for Social Security tax in 2013 was $113,700; any earnings over that limit are not subject to the Social Security portion of the self-employment tax. However, the Medicare tax portion still applies.

You may also be responsible for federal, state or local taxes, depending on the size and nature of your small business.

A business planning attorney can advise you on the laws surrounding self-employment taxes.  Contact our Costa Mesa law firm for help.

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