Self-Employment Tax – Tax Guide • https://www.peterswar.net – File Your Taxes Online

How is self-employment tax calculated?

The freelance are taxed differently than employees are. It ’ sulfur all about withholding and employer matching. here ’ s how it works :

  • When you’re an employee, your employer withholds Social Security and Medicare taxes from your paycheck. Your withholding rates are 6.2% for Social Security and 1.45% for Medicare. Your employer also contributes matching amounts, for a combined payment of 15.3% of your income (that’s 12.4% for Social Security and 2.9% for Medicare). Only the first $137,700in income (for 2020) is taxed for Social Security. There is no maximum for Medicare.
  • When you’re self-employed, no one withholds, and no one makes matching payments. But the full 15.3% still has to be paid, and you’re responsible for paying all of it yourself. But: Half of this is deductible from taxable income.

Your requital of Social Security and Medicare taxes is called self-employment tax. Don ’ thymine jumble it with income tax ( see below ), which is extra .

Who must pay self-employment tax?

In general, you must pay self-employment tax if :

  • Your net earnings from self-employment were $400 or more, or
  • You had church employee income of $108.28 or more.

If you earned adequate self-employment income, you must pay self-employment tax careless of your age, even if you ’ re a minor dependent or are retired and already receive Social Security or Medicare benefits.

Net earnings are calculated by subtracting deductible expenses from your gross self-employment income. Use Schedule SE to figure your net earnings from self-employment and the amount of self-employment tax you owe.

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Are SE earnings also subject to income tax?

Yes, though the amount of taxable income is figured slenderly differently than for employees, because of the much greater range of let deductions. One of the deductions is for half of your self-employment tax. so even though you have to pay the entire self-employment tax, you get half of it back when you prepare your render .

What are estimated taxes?

Some people confuse self-employment tax with estimated taxes, which are more by rights called estimated tax payments. Whatever you call them, they aren ’ t a different or separate tax, but merely how you pay your self-employment and income taxes all year long. Remember, taxes are pay-as-you-go, and estimated tax payments are how you pay as you go. See estimate Tax Payments for more details about how the payments employment .

Let’s get your SE taxes done right with 1040.com

Taxes can be simple for freelancers, too—that ’ s what we believe at 1040.com, and our directly $ 25 rate is for everyone. No more worries about the price going up as you file your self-employment taxes. Sign up or log in today to see the difference !

source : https://www.peterswar.net
Category : Finance

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