Freelancing work is becoming more and more popular in today’s economy. But if you make more than $400 in a year, you will need to file self-employment taxes. You must have a Social Security number or a tax identification number to file for self-employment taxes.
The first step you need to take when determining your self-employment taxes is to add up the total income taken in by your business or service. You will then need to calculate your total business expenses. The IRS website will have a list of business expenses, or you can contact a tax consultant to assist you. Subtract the total amount of business expenses you have from the business revenue that you calculated first. Multiply your net income by 92.35% or 0.9235. This figure will be your taxable income.
The next step is to find the current rates for self-employment. These can be accessed on the IRS website. Income limits will determine how much you must pay in taxes so make sure to select your correct bracket. You are entitled to a 50% deduction of your total self-employment tax. If you need more information on this, you should contact a tax consultant.
Next, you need to enroll in the Electronic Federal Tax Payment System. Once you are logged on to the system, you can request to pay your taxes as required. You can pay the self-employment tax with a credit card or by bank transfer. Make sure to save your confirmation number in the event your payment is lost.