What To Know About Small Business Self-Employment Taxes?by Harley Green Accountant
your experience with owning your own business, freelancing, or working as an
pay self-employment tax, which is a tax you never paid as an employee. For
assistance, contact an accountant Marina
tax (officially called SECA tax for Self-Employment Contributions Act tax) is a
tax paid by self-employed persons on their net earnings for Social Security and
Self-Employment Taxes: What Are They?
self-employment taxes include Social Security as well as Medicare taxes.
self-employment tax rate of 15.3% is calculated by deducting 12.4% for Social
Security and 2.9% for Medicare.
employees, the company pays 7.5% or half of the tax, and the rest is deducted
from your paycheck.
if you are self-employed, you are responsible for paying all 15.3% of
Paying Self-Employment Taxes When?
come under any of the mentioned criteria, you’ll have to pay self-employment
- From self-employment, you earned $400 or more in net income
(excluding income from employment at a church).
at a church, you earned at least $108.28 in income.
with a professional accountant Marina
Del Rey who can guide you on the nitty-gritty of self-employment tax
When Are You Exempt from Paying Self-Employment
taxes are not due if:
- You did not earn more than $400 in net income for your business
income is income that comes from other sources.
income is derived from a business in which you do not actively participate.
Or, if the
income is derived from rental activities, such as owning rental property.
The How-To's Of Calculating Self-Employment Taxes
Step 1: Calculate your net earnings first.
the net earnings by considering the gross income from the business and
subtracting deductions, tax credits, and depreciation allowances.
calculation may differ depending on the type of business, but here is the
addition, if your business has a net loss or a small amount of income, you are
not required to pay self-employment taxes.
Step 2: Multiply your net earnings by 92.53%.
the significance of 92.53%?
know, self-employment taxes are
deductible to the extent that you have taxable income as a self-employed
person. For more information, contact an
accountant Marina Del Rey.
IRS, this is referred to as the "employer-equivalent" portion of your
Step 3: Multiply Step 2's result by 15.3%.
discuss how to pay self-employment taxes now that you know how to calculate
You can save on taxes by familiarizing yourself with the
business deductions and credits that you can take advantage of as a business owner.
To get you all started, check a quick list:
- Organizational and startup costs
- Technology and office expenses
- Business lunches
- Deduction for home office
- Use of vehicles
- Salary and benefits
Created on Aug 2nd 2021 03:56. Viewed 405 times.