A Reminder of Estimated Tax Deadline for the Self-Employed

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Tax Deadlines for Self-Employed Approaching

Hurry up if you are self-employed! Your quarterly taxes for the final quarter of 2018 are due on January 15th.  If you are an independent contractor, freelancer, home-based entrepreneur or sole proprietor of a trade or business, the filing time is almost up. Also, it is the right time to calculate your estimated income for 2019 and prepare for quarterly filing on April 15th, June 15th, and September 15th this year. The dates could be shifted to the next business day if any of these dates fall on a weekend or public holiday.

What Taxes do you have to pay if you are Self-Employed?

Your quarterly filing should include both the Income Tax and the Self-Employment Tax. Usually, self-employed who earn more than $1000 pay the taxes quarterly. The Income Tax component will be in accordance with the 2019 brackets that have been adjusted by 2% for inflation. Besides this, the Self-Employment Tax, which has to be paid in lieu of Social Security and Medicare expenses, otherwise paid by employers and employee combined will also have to be paid. If your annual income was or is projected to be higher than $400, you are liable to pay Self-Employment Tax. The Self-Employment Tax rate stands at 15.3% of income, constituting 12.4% for Social Security and 2.9% for Medicare. It has to be filed through Schedule SE of form 1040.

It isn’t that simple, however?

If you are a high-income earner, you need to pay Self-Employment tax at a higher rate. In such a case, Social Security wage base and Additional Medicare Tax of 0.9% will be applicable. Social security wage base comes into the picture if you earn as both employed and self-employed. If your income overshoots the upper limit for Social Security, you will need to pay 50% of the income over the upper limit. This upper limit is $ 132, 900 for 2019.

Deductions available for Self-employed

If you are paying the self-employment tax, you are technically paying both as an employee and employer. You will be allowed the following deductions:

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  • Qualified Business Income (QBI): 20% deductions are allowed on income which is spent as everyday household expenses by sole proprietors.
  • Home Office Deduction: If you use a designated space in your home as office space, you could be allowed deductions for that.
  • Depreciation: If your business involves supplies that have a lifespan of more than a year, a deduction equal to 100% of its depreciated value will be allowed.
  • Educational Expenses: If you take classes, do special training, attend workshops and seminars for your business, you can claim deductions for these expenses.
  • Travel Expenses: Deductions are allowed on business trips provided that:
    1. The travelling days qualify as full work days.
    2. Most of the time must be spend for business when travel is inside US.
    3. When travel is outside US, atleast 25% of time must be spent for business. If the time is less than 25%, then only that fraction of expenditure will be permissible for deductions.

Paying taxes can be cumbersome for self-employed. There isn’t just one but many calculations that have to be made to gauge income, and besides that, deductions have to be maximized so that you are never short of funds. At MyTaxFiler we ensure that you pay minimum tax by keeping a track of your expenses that can be counted as deductions. We help you calculate your quarterly tax returns accurately and file them smoothly so that you can go about hassle-free with your business finances. Email to us for consultation at tax@mytaxfiler.com. 

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