Being self employed often raises a lot of questions when you go to fill out legal paperwork. You often are not provided with common forms like your 1099 when you work from home. Many who work online also have clients that are overseas, making it even harder to get your hands on the United States tax forms you might need to track your earnings. Working with a tax specialists
How to I Pay My Taxes?
Unlike most other businesses, people that work for themselves must pay quarterly tax including a social security and Medicare tax. To do this you will need to total up the net earnings and losses from your business to determine the overall value of your earnings. You can then report this on a 1040 form. You can either get this form online or talk to a tax firm to get help determining the value of your earnings.
Making Your Quarterly Payments
Normally an employer will withhold the amount from your check that is used to pay your taxes, so those working for themselves will need to take on this responsibility. There is a form called the 1040-ES which can help you get started. It is generally recommended that you keep any vouchers that you have regarding how much you earn. If this is the first time you have been working as a self-employed person you will need to use these to estimate your future quarterly payments. You can always fill out another 1040 if it turns out your estimates were off track.
How does this Impact my Annual Return
You can still file an annual return even if you have been paying quarterly taxes. All you need to do is check the schedule C EZ forms provided by the IRS. This will help you add up any deductions or additional payments you might owe just like other businesses. A CPA can provide a lot more information about how to do this based on the taxes that you have already paid each quarter.
Common Deductions for Self-Employed People
A tax preparer can walk you through a variety of options that you can use to get a few deductions on your taxes. The first step in doing this is outlining your business structure. Different businesses such as corporations, partnerships or sole proprietorships have different tax requirements that you will need to fulfill. Your accountant will probably have walked you through this when you founded your company.
Other common deductions include:
- If you and your spouse are working in business together you might be eligible to file your taxes as a joint venture. You will need to file a married joint return in order to be eligible for this.
- You may also be eligible for more deductions or a variance in your business setup if most of your other employees are family members.
- If you use a portion of your home as an office for your business then you could deduct any expenses that come from setting up this area or maintaining it.