The tax bill can come as quite a surprise for self-employed people.
Because funds are not withheld from your paychecks, many people don't realize how much they will have to pay come tax time.
Self-employed people are responsible for paying a SE tax (or self-employed tax) in addition to their regular federal and state taxes.
The SE tax is comprised of Social Security and Medicare and counts for 15.
3% of your income.
This is more than traditionally employed people pay because their company is paying half of this tax bill.
All is not lost however.
You are able to deduct half of this tax bill when filing your regular tax form, making, reducing your taxable income.
If you are self-employed, the tax forms that you need to fill out are: Form 1040 (for federal taxes) Schedule SE (for self-employed tax) Schedule C (for income) Schedule D (for losses) You must make sure that you keep very good records in order to file your taxes.
All earned income should be reported and you should have the receipts to back up any deductions.
Many self-employed people use itemized deductions as a way to reduce their tax bill.
You can deduct business expenses, charitable contributions and some medical expenses.
You can also reduce your tax bill by contributing to a retirement fund such as an IRA.
If all of this is confusing to you, don't worry.
Taxes for self-employed people are a lot more complicated than for other people.
Self-employed people are also more likely to be called for an audit.
Because of this, many people choose to turn to a tax professional to help them.
A tax professional understands the tax laws and can assist you in getting organized with your taxes.