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Self-Employed? Know When To File Your Tax

Self-Employed? Know When To File Your Tax June 3, 2024

Being self-employed is, for the most part, a fantastic experience it is also important to know when to file your tax.

Being self-employed is, for the most part, a fantastic experience it is also important to know when to file your tax. You get to call the shots now that you’re the boss: you get to choose your projects, establish your hours, and reap the benefits when business is thriving.

Every rose, however, has a thorn. Tax season can be particularly difficult for the self-employed.

The IRS sits up and takes notice when you establish yourself as a freelancer, contractor, or self-employed small business owner.

You used to despise those little lines of figures at the bottom of your paycheck when you worked for a living – why are they withholding so much? — but now that you’re liable for all of your income taxes (not to mention self-employment taxes), you long for the days when your job withheld taxes for you.

Keep your head held high! You left the corporate world for a purpose, and filing taxes as a sole proprietor doesn’t have to be any more difficult than filing taxes as an employee. Yes, paying taxes necessitates paying attention, and preserving all of your receipts is a headache, but you can learn everything you need to know to keep the taxman off your back in just a few minutes (well, maybe more like an hour).

Related Article: Get Small Business Loan to Pay Taxes

Filing Your Business’s Annual Tax Return

You will still need to file an annual return if you are self-employed. Yes, this means another round of paperwork, but on the good side, if you’ve been filing quarterly, you won’t owe them anything this time, and you might even get a refund!

Four Times As Much Fun!

“As a self-employed individual, you are normally required to submit an annual return and pay estimated tax quarterly,” according to the IRS’s official website.

Individuals who work as a sole proprietor or independent contractor, are members of a business partnership or earn direct income as a freelancer are considered “self-employed” by the IRS. As a sole proprietor, you must pay regular income taxes and self-employment (SE) taxes, representing your Medicare and Social Security contributions.

As you surely know, the IRS is a big fan of laws and regulations. They have regulations for deciding who is self-employed, and they also have criteria for determining who must report and pay their taxes quarterly.

In the end, if you’re self-employed, you’ll almost certainly have to pay estimated tax four times a year. Some individuals may be exempt from reporting quarterly (if your business generated a net loss, if you haven’t been in business for a full year, or if you earned less than $600 from your business), but if you’ve been in business for 12 months and are earning an income, it’s time to get started on your quarterly estimated taxes.

Estimated taxes are exactly what they sound like: you pay about a quarter of what you estimate to owe the IRS at the conclusion of the current year using last year’s return and the worksheet available in Form 1040-ES. If you overspend, you’ll get a refund when you file your tax return in April; if you underpay, you’ll have to pay more in the spring.

Last but not least, make sure you pay your quarterly taxes on time. If you fail to file your taxes on time, the IRS will penalize you at the end of the following quarter, and the fines can quickly build up. You know when to file your tax and the importance of not missing of filing it.

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