Filing Self Employed Taxes: What You Need

By MBO Partners | February 22, 2022

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Independent business owners file taxes differently than traditional, W-2 employees. If this is your first time managing taxes as an independent contractor, don’t worry. It may feel a bit complicated at first but you’ll get the hang of it soon enough! Below, we answer all your questions about paying taxes as a self-employed professional.

What Are Self-Employed Taxes?

When you run your own business, you will be responsible for paying the following:

  1. Income tax, which is based on your tax bracket
  2. Self-Employment (SE) Tax, which is both the employer and employee halves of Social Security and Medicare (FICA)

Plan on doing is setting aside around 30-35% of  your gross income for these taxes. Also, keep in mind that if you live in a state that has income tax, you will also need to make estimated tax payments to your state. For information about state taxes, check your state’s business resources for deadlines, resources, and forms. You can find more information about business tax requirements in your state through the Small Business Administration (SBA).

When Are Self-Employed Taxes Due?

Estimated tax payments are due quarterly. When a client pays you, there are no taxes taken out of that payment. Estimating what taxes you owe and then paying them quarterly helps to prevent you from having a big tax burden at the end of the year. Each quarter has a deadline on the 15th, which shifts to the next business day if it falls on a weekend. Here is a breakdown of a typical payment schedule as outlined by the IRS:

Payment Period Due Date
January 1 – March 31 April 15 (Q1)
April 1 – May 31 June 15 (Q2)
June 1 – August 31 September 15 (Q3)
September 1 – December 31 January 15 of following year (Q4)

 

What Tax Forms Do I Need as an Independent Contractor?

For Self-Employment Tax: You will need to file Form 1040-ES, Estimated Tax for Individuals if your net earnings are $400 or more. This form and worksheet will help you calculate your quarterly tax payments.

For Annual Tax Return: Use Schedule C to file your annual tax return. This is where you will report your income or loss from your business. Then, you will file Schedule SE (Form 1040 or 1040-SR), Self-Employment Tax to report your Social Security and Medicare taxes.

Where Do You Pay Self-Employed Taxes?

The tax forms mentioned above are available on the IRS website. You can print vouchers and mail in quarterly payments or pay online using the Electronic Federal Tax Payment System (EFTPS).

Self-Employed Tax Tips

When paying self-employed taxes, it is really important to keep track of your paperwork. Staying organized and keeping track of your payment history will simplify the tax-filing process. And keeping accurate records will make it easier to pay taxes year after year. There are also numerous  self-employed tax deductions  available. Be sure to save receipts and keep records of business travel, transportation expenses, and insurance costs.

The IRS has a Self-Employed Tax Center that is a great source of information and links to all the forms you’ll need. Paying taxes as a self-employed professional can be a tricky road to navigate. There are always changing forms, rules, and tax laws—plus, you’ll want to be sure you claim all of your eligible self-employment deductions. We always recommend consulting a professional tax preparer or accountant.

Check out: 9 Self-Employed Tax Deductions You May Be Overlooking

The information provided in the MBO Blog does not constitute legal, tax or financial advice. It does not take into account your particular circumstances, objectives, legal and financial situation or needs.  Before acting on any information in the MBO Blog you should consider the appropriateness of the information for your situation in consultation with a professional advisor of your choosing.

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