Self Employment Tax Rules For Fiscally Challenged

Self Employment Tax Rules For Fiscally Challenged



Even as​ your enthusiasm about finally making some money in​ your home based business is​ beginning to​ build,​ in​ the​ back of​ your mind the​ nagging worry about the​ tax ramifications that your sudden income will generate cannot be denied. Sure,​ you​ probably read up on​ tax liabilities,​ but more than likely with an​ eye to​ tax deductions rather than self-employment tax.

Self-employment tax rules for the​ fiscally challenged are by no means all-inclusive,​ but they do provide a​ good rule of​ thumb that helps you​ understand how much of​ a​ hit you​ can expect Uncle Sam to​ take. When you​ are in​ business for yourself this is​ very important information to​ have and understand.

Many a​ myth has sprung up around self-employment taxes,​ but in​ essence they are little more than your paying into the​ social security and also Medicare funds. in​ the​ past,​ you​ saw these deductions on​ your paychecks.

At this point in​ time,​ your self-employment tax rate – regardless of​ income below $94,​200 – is​ set at​ 15.3%.

A much-overlooked rule dictates that you​ are supposed to​ pay your estimated self-employment tax throughout the​ year. This is​ true especially when you​ find at​ the​ end of​ the​ last year that you​ owed taxes – of​ any kind – exceeding $999. Estimated tax payments may be made during the​ year and thus will ease the​ hit you​ may take at​ the​ end of​ the​ year.

Interestingly,​ if​ you​ just started out with your home base business,​ you​ might be able to​ get away with not paying self-employment tax,​ if​ your net income was at​ or​ below $399. at​ this point it​ is​ still considered hobby income and will not be subject to​ the​ tax.

If in​ doubt,​ you​ will be wise to​ invest some time and money and visit with your friendly neighborhood accountant who should be able to​ give you​ some tips as​ to​ what you​ might have to​ look forward to​ when the​ taxes come due. in​ addition to​ the​ foregoing,​ investing the​ time now and discussing monies owed as​ well as​ allowable expenses with your tax professional will prevent you​ from claiming – or​ attempting to​ claim – deductions for which you​ either do not qualify or​ only have a​ limited and conditional claim.

Those who are truly fiscally challenged usually opt to​ have a​ tax preparer handle their business taxes at​ least during the​ first year so as​ to​ ensure that each and every schedule is​ included,​ the​ majority of​ deductions makes it​ into the​ return,​ and a​ good starting record is​ established that may serve as​ an​ example for the​ coming year when the​ entrepreneur might try to​ go it​ alone. Since the​ money you​ spend on​ a​ professional tax preparer is​ deductible,​ it​ is​ indeed a​ wise expense!

As you​ can see,​ the​ self employment tax is​ not really something to​ be dreaded and feared,​ but it​ is​ a​ tax that must be paid and when you​ fail to​ make estimated payments throughout the​ year,​ you​ will find that the​ end of​ the​ year hit may be especially hard to​ take.




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