Self-Employment Tax Issues

If you are self-employed, you are responsible for taking care of your own taxes. You no longer have an employer to do this for you, and this can result in self-empoyment tax issues. Some self-employment tax issues include deductions, reporting your own income and paying quarterly taxes.

Tax Deductions

If you are self-employed, you may qualify for numerous tax deductions. Deductions you may be able to take include equipment, gas and the cost of your own health insurance. If you want to take itemized deductions, you will need to keep your receipts as a record of the money you spend on work related items. While you can file your taxes on your own, it is best to consult a tax professional for at least your first year. They will be able to tell you exactly what you can deduct because they are well versed in the tax code.

Keeping Track of Your Own Income

As a self-employed person, it is your responsibility to keep track of the money you make. Depending on what kind of work you do, you may work as an independent contractor and receive a 1099 form at the end of the year. This form will show exactly how much the company paid you throughout the year. However, if you offer a service to individuals or sell things, you might not get a record like a 1099. Thus, it is up to you to keep track.

Paying Quarterly Income Taxes

If you work as an employee, you do not need to pay quarterly taxes. Taxes are automatically deducted from your paycheck and paid to the Internal Revenue Service. However, as self-employed worker you must pay your own taxes. If you make over a certain amount per year, the IRS expects you to make quarterly payments. Consult an accountant or tax professional for help calculating your payments.