If I’m Self Employed How Much Tax Do I Pay?

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Are you tempted to start your own business but you’re worried about, ‘if I’m self employed how much tax do I pay‘?

Who has not dreamed of quitting their day job, starting their very own company, and living happily ever after?

Abrasive bosses and questionable decisions could make a normal 9 to five job grow stale pretty fast.

Today, more individuals than ever before are enjoying the freedom which comes along with starting a small business and being their very own boss, but what about the taxes?

It brings up questions like:

  • How much should you pay, and how frequently?
  • What may you claim as company expenses?
  • What may be deducted?
  • What are the tax write-offs?

One good thing about those regular, 9 to five jobs is they look after tax payments for you by withholding them from your paycheck.

On the other hand, if you begin a small business of your very own, you’ll be accountable for withholding your very own taxes and paying them on a different schedule.

 

If I’m Self Employed How Much Tax Do I Pay?

Sole proprietorships are the category that many small businesses fall under when they’re created and have relatively simple tax rules.

The sole proprietor pays estimated taxes 4 times a year.

If they fail to pay quarterly, they’ll be penalized at tax time, to the tune of 8% of their annual income.

People who fail to pay their taxes at all may expect the Internal revenue service to come knocking – literally or figuratively, depending upon how much they neglected to pay.

To prevent the dreaded audit, make sure to keep a meticulous record of your income and company expenses, and pay your taxes on time.

Tax payment coupons can be printed from popular tax software programs, or downloaded from the Internal revenue service website.

This is more uncomfortable than having your taxes withheld from the get-go, but small businesses also get special tax advantages that you won’t enjoy as another person’s employee.

 

Tax Deductions and Advantages

If you do most of your work from your home, you can claim a deduction for your home office, including the depreciation on the space.

Remember, a home office isn’t necessarily an entire room.

Part of a room will suffice.

Rent may also be claimed as a business expense.

The forms can be a source of confusion, though, so be sure to read them cautiously and enlist a tax professional if you need help.

Self employed workers may also write off business equipment purchases as tax reductions, to a maximum of $18,500 annually.

If you do need a better computer to keep up with your company needs, you can feel good about buying one, because it counts as a valid business expense.

Contributions to pension plans are also deductible.

And do not forget the expenses you incur from marketing, advertising, and promoting your company.

Gasoline and auto repairs can be deducted if you use your vehicle for your company or whether you have got a company owned vehicle.

Finally, office supplies are another deduction.

Otherwise, less tangible expenses may be utilized as tax reductions.

I hope this helps you get the answers you need to the question, ‘if I’m self employed how much tax do I pay?’

 

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