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August 30, 2023
Question

Pay social security

  • August 30, 2023
  • 1 reply
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I usually work as self employed but its "informal" and my employer doesn't give me a W2 or anything else.

Do I have to pay any tax?

1 reply

Sean Enrolled Agent
August 30, 2023

Great question!
The IRS requires you to report all of the income that you earned each year, no matter how "informal" the job is.
If you are being paid cash and do not receive a 1099-NEC form, you still need to report your earnings to the IRS.

Depending on how much you make and any expenses that cut into your profit, you may have to pay self employment taxes at the end of the year.

Most independent contractors pay estimated taxes to the IRS and to their state during the year. That way, they are paying as they earn income.
You can use the IRS Tax Withholding Estimator calculator located at this website: https://apps.irs.gov/app/tax-withholding-estimator

Once you have an idea of how much you will owe for 2022, you would then want to make estimated payments to the IRS so that you are paying taxes as you are earning the income.
You can use the IRS website in order to make estimated payments here: https://www.irs.gov/payments/direct-pay

Our tax system is known as a "pay as  you go" tax system. This means that the IRS expects taxes to be paid as income is earned. That was easy to do when you had a job and your employer paid taxes for you on each paycheck.
Now that you are an independent contractor, you will want to make sure that you take care of these payments during the year. If you wait until the end of the year, you could face some penalties and fines for not paying taxes during the year.

For more help with how to plan for paying taxes as an independent contractor, please feel free to use the following websites for some tips and tricks:
https://turbotax.intuit.com/personal-taxes/self-employment-taxes/
https://turbotax.intuit.com/tax-tips/self-employment-taxes/beginners-tax-guide-for-the-self-employed...
https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-form-1099-nec/L5fbwIFSn

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