You've performed it, followed your dream and began your own organization, and now reality hits. Income tax time is approaching and it's time to calculate your taxes.
You need to discover all you could about taxes, just as you learned all you could about your enterprise.
Self employment tax applies to everyone who's self employed and made far more than (let's hope so) $400 a year. It does not matter how old you might be, even old enough to collect social security, the federal government desires their component of your income.
When you might be employed, your employer shares the tax burden with you, they pay 7.65% of your income and so do you. If you are self employed you get to pay the entire thing, 15.3%. 12.4% goes to pay Social Security and 2.9% for Medicare. But this only applies up to income of $94,200. Above that you only pay the 2.9% for Medicare.
When you're self employed, it really is your responsibility to pay quarterly estimated tax payments. For those who had been employed your employer would do this for you, but because you get to be your own boss, you need to deal with this. Quarterly estimated taxes are due in April, June, Sept. and Jan. In the event you do not pay them you could possibly be topic to underpayment penalties.
I would suggest which you get the large picture concerning your tax liability. You might will need to program ahead. Benefit from a totally free on line income tax calculator and estimate your quarterly self employment tax, and calculate your estimated income tax as well. Know ahead what's expected of you. Isn't your company worth it?
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