The Basics of Self-Employed Taxes

There are a lot of benefits to being self-employed. But, things can definitely get tricky when it comes to filing your taxes. The good news is, you don’t have to be an expert to file your own return. Here are some basic facts about self-employed taxes to help you get started.

What is the self-employment tax?

The self-employment tax is essentially your portion of Federal Insurance Contributions Act (FICA) tax.

For employees who receive a W-2, FICA tax comes directly out of their paychecks. W-2 employees pay 7.65% on wages up to $137,700 for Social Security and Medicare (FICA), and their employers match this payroll tax, so the total paid per employee for FICA is 15.3%.

As a self-employed worker, you are responsible for the full 15.3% tax. Learn more about how the self-employment tax works.

Do I also have to pay federal taxes?

The short answer is yes. Just as W-2 employees pay FICA and federal taxes out of each paycheck, self-employed workers must pay the self-employment tax and federal taxes.

Whether you’re a full-time freelancer or do some projects on the side for extra cash, you need to file an IRS Form 1040, U.S.Federal Income Tax Return, if you earned $400 or more from your self-employment.

Your business income will be reported on Schedule C, and your self-employment tax will be calculated using Schedule SE. Learn about different self-employment tax forms.

Can I deduct business expenses when I’m self-employed?

Yes. As a self-employed worker, there are certain expenses you can write off when you file your income tax return. For example, if you have a home office, you may be able to deduct a portion of those costs. You may also need to travel for your business. In that case, you could be deducting a certain amount for mileage.

Other business expenses that could be deducted are things like advertising costs, business insurance, rent, education, meals and more. It is important to research the necessary guidelines to see which ones you qualify for.

Using TaxSlayer for self-employed taxes

Knowing which taxes you’re responsible for as a self-employed worker is a lot to manage–especially if you’re busy finding new business, maintaining the quality of your product and everything else that goes into working for yourself. That’s all the more reason to use TaxSlayer Self-Employed. TaxSlayer makes it easy to complete your forms, calculate your tax, and claim all the tax deductions and credits you deserve–at a fraction of the cost of the competition. Start using TaxSlayer for free today.

The information in this article is up to date through tax year 2021 (taxes filed 2022). 

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