Self-Employed Tax Returns | Gordon Law Group

Maximize Savings On Your Self-Employed Tax Returns!

Self-employment can bring many advantages, and preparing for tax season is a crucial part of financial management when you’re your own boss. Self-employed individuals are required to pay self-employment tax in addition to income tax .

By being aware of this tax and understanding how it works, you can take full advantage of the benefits of being self-employed and successfully file your self-employed tax returns. 

Contact Gordon Law Group for a confidential consultation today!

What is self-employment tax?

You’ve decided to break away from the 9 to 5 life and start your own business. Escaping the daily grind doesn’t mean you’re off the hook from paying taxes.

The self-employment tax, also known as the SECA tax (Self-Employment Contributions Tax), is a mandatory payment that self-employed individuals make to fund their Social Security and Medicare.

The IRS requires you to file self-employed tax returns if either of the following applies:

  • Your net earnings from self-employment are more than $400
  • You received more than $108.28 as a church employee

Self-employed individuals, such as freelancers, independent contractors, and sole proprietors, often pay more taxes at the end of the year than employees.

In most cases, employees split Social Security taxes and Medicare taxes with their employer and have their share automatically deducted from their paychecks. If you’re self-employed, you are responsible for paying the total SECA tax, which is currently 15.3%.

This includes Social Security taxes (12.4%) and Medicare taxes (2.9%). In 2022, the Social Security portion of the self-employment tax only applies to the first $147,000 earned.

 

 

John Nagle, Head of Tax Law

Navigate Self-Employment Taxes with Confidence

Don’t let your self-employed tax returns get the best of you! Our tax preparation team can help you navigate tax season! 

We will provide: 

  • Trusted guidance on tax laws and regulations 
  • Advice on self-employment tax planning for the future
  • Accurately filed self-employed tax returns to avoid IRS audits

Contact us now for a free consultation.

Contact Gordon Law Group

Submit your information to schedule a confidential consultation, or call us at (847) 580-1279

How To File Self-Employed Tax Returns

Filing self-employed tax returns can be overwhelming if you’re new to the process. But don’t worry; we’re here to help! 

Which forms do you need to complete? Do you have all the necessary documents?

Here’s how to file self-employment taxes step by step:

  1. Determine if you are required to file self-employed tax returns: If you’re self-employed and earn more than $400 a year, you must file a self-employed tax return.
  2. Gather income and expense documents: Gather records of your income and expenses to determine your net earnings, including invoices, receipts, and bank statements.
  3. Calculate your net earnings from self-employment: To calculate net earnings from self-employment, subtract your business expenses from your income. This amount is your net earnings and is subject to self-employment tax.
  4. File a tax return: Use IRS Form 1040 and Schedule SE to report your self-employment income and pay any taxes you owe.
  5. Make estimated tax payments: If you expect to owe more than $1,000 in taxes, you may be required to make estimated tax payments throughout the year to avoid underpayment penalties.

Maintaining accurate records and filing taxes promptly can help you avoid IRS penalties or interest. 

Don’t let the paperwork and frustration get you down – let us handle it. Contact us today to learn more about how we can help with your self-employment tax filing needs.

Self-Employed Tax Return Due Dates

You have two options for paying your estimated tax bill: pay the entire amount on April 15 or divide the total amount into four equal payments and pay each quarter.

The due dates for quarterly payments are:

1st payment: April 15

2nd payment: June 15

3rd payment: September 15

4th payment: January 15

 

Self-Employment Tax Deductions

On the bright side, self-employed individuals can deduct up to 50% of their self-employment tax from their income tax.

If your Schedule SE shows that you owe $3,000 in self-employment taxes for 2022, you can claim a deduction of $1,500 on your income tax return for the year.

Qualified Business Income (QBI) Deduction

The Qualified Business Income (QBI) deduction is a tax break available to business owners and self-employed individuals. 

This tax deduction is a part of the Tax Cuts and Jobs Act of 2017. It provides financial relief to small business owners and entrepreneurs.

The QBI deduction allows eligible taxpayers to deduct a portion of their income earned from their business. It is specifically designed for businesses that are taxed as pass-through entities, such as:

  • Partnerships
  • S Corporation
  • Sole proprietorships

If you are self-employed and a partner in a partnership or a shareholder in an S-Corp,  you will receive a Form K-1 showing your share of the entity’s income, deductions, and credits.

The QBI deduction allows eligible taxpayers to deduct up to 20% of their qualified business income from their taxable income. QBI is the net income from a trade or business earned through a pass-through entity.

This means that business owners who operate through a pass-through entity are eligible to claim the QBI deduction, which can lower their overall tax liability.

However, certain types of income, such as capital gains or losses, dividends, and interest income, do not qualify for this deduction.

The deduction amount depends on a few factors, such as the business owner’s taxable income and the type of business. 

For example, suppose the business owner’s taxable income is above a certain threshold. In that case, particular limits exist for businesses that provide services in fields such as law, finance, consulting, or health.

It’s important to note that this is a complex tax provision, and it’s best to consult with a tax professional to understand how it applies to your business. 

Home Office Tax Deductions

If you use any part of your home for your business, the IRS allows self-employed individuals to take advantage of the home office tax deduction.

To qualify for the home office tax deduction, self-employed individuals must meet two basic requirements:

  • Regular and exclusive use
  • Principal place of business

To qualify under the regular use test, the IRS requires you to use a specific area of your primary residence consistently for your business.

The term “exclusive use” refers to using an area of your home exclusively on a regular basis as the principal location for your trade or business.

The rules for claiming home tax deductions can be complex and may vary depending on your circumstances. It’s always a good idea to consult with a tax lawyer to see if you qualify to claim these deductions.

Business Tax Deductions

The deductions continue beyond your home office if you’re self-employed. Other standard business expense deductions self-employed individuals can take advantage of include:

  • Cell Phone 
  • Wifi
  • Auto Expenses
  • Software
  • Continuing Education

The good news is that you aren’t required to be registered as an LLC to claim these write-offs, and you’ll use Schedule C to take advantage of these expenses

Self-employment can bring many advantages, and preparing for tax season is a crucial part of financial management when you’re your own boss. Self-employed individuals are required to pay self-employment tax in addition to income tax .

By being aware of this tax and understanding how it works, you can take full advantage of the benefits of being self-employed and successfully file your self-employed tax returns. 

Contact Gordon Law Group for a confidential consultation today!

Take Control of Your Self-Employed Tax Returns

If you are self-employed, it’s important to remember that you are responsible for paying your taxes. Start thinking about your tax obligations before it’s too late!

Tax planning can ensure that you have enough time to gather all of the necessary documents, calculate your tax liability, and make any estimated tax payments that may be required.

Contact Us for Self-Employed Tax Return Filing!

“Gordon Law Group has been incredibly helpful and a pleasure to work with.Their level of professionalism, attention to detail, and experience has been a huge blessing.”

-John M.

Michael Brandwein, Tax Attorney

Contact Gordon Law Group

Submit your information to schedule a confidential consultation, or call us at (847) 580-1279