The Complete Guide To Filing Self-Employment Taxes
If you're self-employed, you're responsible for filing and paying your taxes on time. Here's what you need to know about self-employment taxes before filing your next return.
Filing self-employment taxes can be intimidating, but the process is easier if you’re prepared. This guide explains the types of self-employment taxes, important tax due dates, and step-by-step instructions on how to file your self-employment taxes and make quarterly tax payments.
Own a small business? Be sure to check out our small business tax guide to learn more about small business tax credits, deductions, and how to get the most out of your next tax return.
Table of Contents
- What Are Self-Employment Taxes?
- Who Has To Pay Self-Employment Taxes?
- Types Of Self-Employment Taxes
- Self-Employment Tax Due Dates
- How To Make Estimated Quarterly Tax Payments
- How To File Self-Employment Taxes Step-By-Step
- Additional Self-Employment Tax Tips For Easier Filing
- The Bottom Line On Filing Self-Employment Taxes
What Are Self-Employment Taxes?
If you are employed, federal, state, Medicare, and Social Security taxes are calculated and automatically deducted from your paycheck. If you are self-employed, you are still responsible for paying taxes. However, your taxes won’t be automatically deducted every time a client pays you.
Instead, you will be required to file additional forms with your annual tax return and pay any taxes owed. In some cases, you may be required to estimate your tax liability and pay taxes every quarter.
Who Has To Pay Self-Employment Taxes?
There are several types of self-employed workers, including:
- Independent contractors
- Sole proprietors
- Gig workers
If you’re self-employed, you may get paid in a variety of ways, such as through an online freelancing platform, through your website or payment platform, or via paper check. Regardless of how you are paid, income taxes will need to be paid on all revenue received, and in most cases, self-employment tax is also a requirement.
Types Of Self-Employment Taxes
There are several types of self-employment taxes you will be responsible for paying. Here are three types of taxes, what they’re used for, and how they’re calculated.
Self-Employment Tax Due Dates
|Tax Form Used
|Self-Employment Income Tax
|Form 1040, Schedule C
|Income Tax Extension
If you’re self-employed, you are required to file an annual income tax return with the IRS. Tax returns are to be submitted to the IRS by April 15. If this date falls on a weekend or holiday, returns are due on the next business day.
If you submit your return early, you aren’t required to make a payment at this time. However, you will be required to submit payment for your tax liability by April 15 (or the following business day if April 15 falls on a weekend or holiday). If you e-file, your payment options include using a credit card, debit card, or eCheck. If you file by mail, you will need to send a check or money order — do not send cash.
It is possible to request a six-month extension for your annual tax return. An extension gives you additional time to file your return but payment is still due on April 15.
Failure to pay your taxes by the due date will result in interest and penalties, so it’s important to pay as quickly as you can.
If you find yourself in a situation where you cannot fully pay your tax liability, the IRS offers payment plans. You can learn more by calling the IRS or visiting the IRS website to sign up.
Estimated Quarterly Tax Due Dates
|Tax Form Used
|January 15 (of the following year)
While some self-employed individuals can simply file their annual returns, you may be expected to make estimated quarterly tax payments if you expect to owe the IRS $1,000 or more.
Quarterly taxes are due each quarter. You must complete and submit Form 1040-ES along with payment. If any of the due dates fall on a holiday or weekend, the due date will be the following business day.
How To Make Estimated Quarterly Tax Payments
If you have to make estimated quarterly tax payments, the whole process is relatively easy. Let’s walk through how to file and pay your quarterly self-employment taxes step-by-step.
How To File Self-Employment Taxes Step-By-Step
You can accurately complete and submit your federal tax return in no time by following these steps.
Additional Self-Employment Tax Tips For Easier Filing
You should have a better understanding of what to expect when filing your self-employment taxes. But here are a few additional tips to help simplify the process.
Track Self-Employment Income & Expenses
Avoid scrambling to pull up invoices and receipts by tracking income and expenses throughout the year. The easiest way to track your income and expenses is with accounting software.
Accounting software offers many time-saving features, such as live bank feeds, automatic expense categorization, and receipt scanning. You may also have access to additional self-employment tools, such as invoicing, estimates, project management, and time tracking.
Keep Records & Receipts
Hold onto records and receipts that are used to calculate your income and deductions, such as client invoices, a mileage book, and expense receipts.
You can keep your records organized by:
- Filing hard copies in a filing cabinet
- Scanning & uploading records to cloud-based storage
- Scanning receipts with your accounting software
Hire An Accountant
If you’re filing self-employment taxes for the first time, consider hiring an accountant.
An accountant can find deductions that you may overlook, resulting in a lower tax liability. An accountant can also make sure all forms are completed and submitted correctly. This helps avoid potential errors that could result in paying additional taxes, interest, and penalties.
If you decide to hire an accountant, make sure to have your records and documentation to save time (and money).
The Bottom Line On Filing Self-Employment Taxes
With planning and preparation throughout the year, filing your self-employment taxes should be a breeze. Don’t forget to take advantage of the many accounting and tax software options out there to help you, or turn to a professional accountant to ensure your forms are accurate and submitted on time. You can also check out our guide to filing taxes for the first time for additional tax tips.