This blog is specifically for the person who is self-employed and doesn’t know how you pay the federal government the income taxes owed to avoid an underpayment penalty. So you are now an independent contractor and receive a 1099MISC for your freelance work. This works to your “employer’s” advantage since he doesn’t have to withhold taxes for you, pay worker’s compensation insurance or unemployment insurance (which are the bad things for you, so now you are responsible for the taxes and have no unemployment or workers comp if you are injured doing work or your contract gets terminated). You now have to pay income, social security and medicare taxes on the 1099 income, but can reduce that income by any expenses you had to pay that are work related (since they will not be reimbursed by anyone.) To avoid the underpayment penalty, you have to pay taxes during the year equal to last years tax you owed or 90% of this year’s tax (during the year you would have to estimate as you go.) Figure out the lesser of the two tax amounts, 100% of last year or 90% of this year (remember to include social security (11.45% of your [...]
Tax Musings of a Burbank CPA: The Stealth Refund Killer – Self Employment Taxes
This blog is specifically for the person who is self-employed and isn’t familiar with one of the biggest refund killers in the tax world – self employment tax. When you work as an employee instead of free lance, your employer is required to withhold 6.2% social security tax and 1.45% medicare tax from your paycheck as well as federal and state income taxes plus any local or disability taxes. Then the employer has to match the social security and medicare tax, with the combined employer and employee taxes totaling 15.3% of your wages, of which each pays 7.65%. It is different when you are self employed. You are an independent contractor and your “employer” (actually customer since you are self employed) is not responsible for any taxes you might owe; they just pay you a lump sum. You have an advantage of being able to deduct your expenses against this income, but then you owe income tax on the net. You also owe self employment tax on the net, which is both halves of the social security and medicare taxes (the IRS allows half the self employment taxes paid as a deduction against this, so instead of 15.3% of the [...]
Burbank CPA Tax Musings: Start Planning Now for Next Year’s Taxes
So you have filed your federal and state income taxes for 2014 (unless you are on extension) and are breathing a sigh of relief. Well, now is the time to start planning for your 2015 taxes! Okay, stop looking at me like that. If you do a little at a time and gradually build up to the end of the year, you will have things done with a lot less stress. See this IRS tip with some specifics on 2015 planning ideas: http://content.govdelivery.com/accounts/USIRS/bulletins/100352b?reqfrom=share The sooner you get things done, the sooner you can relax and not worry about appointment scheduling with your preparer, getting things together and kicking yourself for forgetting anything. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Android and the IPhone: Has been Featured On https://twitter.com/bstonercpa