Self Employment Tax

Forum|Forum|2 years ago
August 30, 2023
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where do I pay or how do I go about paying for the self employment tax? I just found out about it during this forum so I am a little confused as to where and when I need to pay that?

Ask the Experts - Self-Employed - Aug 2023

JanetB21

Hello @Mdeleon2010!

If you have a business or received 1099-NEC income, self-employment taxes of 15.3% of your profit (income – expenses) will be added to your tax return when you file your taxes. You can pay quarterly estimated taxes during the year to avoid interest and penalties for amounts due.

This is a great article on estimated taxes: https://ttlc.intuit.com/turbotax-support/en-us/help-article/estimated-taxes/make-estimated-tax-payments/L5svMESaC_US_en_US

What type of self-employment do you have?

I hope this helps!
JanetB211

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Mdeleon2010Author

Thank you so much for answering my question!

So right now it is just me, and I am making about $900 a month(some months being lower), without subtracting business expenses from that month.

I know the threshold for quarterly taxes is $1000 so I havnt been doing quarterly, Ive only been doing the yearly taxes. But during the income taxes that I do with TurboTax which i file as a Self employed person, I am not sure if that are taking the Self Employment tax out of that? If that makes sense? If not how would I go about paying it and would it be due when I do my yearly taxes?

also I am in Texas if thats helpful 🙂

marctu

@Mdeleon2010 thank you for the question. So, the Self-Employment is one part of Estimated Taxes. Remember whether you file as a sole proprietor, partnership or a corporation, individuals often have to pay estimated federal and state taxes on profits from the business. This is an excellent Turbo Tax resource: Beginner's Tax Guide for the Self-Employed

In the abstract let’s do a quick example of self-employment income. For every $1,000 of net income, you would need to pay Self-Employment taxes of 15.3%, plus federal taxes, which range from 10% to 37%, and state taxes potentially as well. Taking the lowest percentages, the tax would be 26.3%. The tax bills could be significant, so you want to get out ahead of this and estimate what your net income is and make estimated payments. There is nothing worse than an unexpected bill.

This is how you would make the payments to the IRS after you have calculated the payment:

You can submit them online through the Electronic Federal Tax Payment System.
You can also pay using paper forms supplied by the IRS.
When you file your annual tax return, you'll pay the balance of taxes that weren't covered by your quarterly payments.

I can also provide a link for the state if it applies to you. Just reply with your resident state.

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Mdeleon2010Author

There were two responses to this post 😱 so I dont know which one will be seen buuut:

Thank you so much for answering my question!

So right now it is just me, and I am making about $900 a month(some months being lower), without subtracting business expenses from that month.

also I am in Texas if thats helpful 🙂

JanetB21

@Mdeleon2010, as long as you are entering your income and expense in the Self Employed section of TurboTax, any Self Employment tax due will be added to your tax return. Perhaps you have had losses after your expenses? If so, then no Self-Employment tax would be due. Does that help?

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