Becoming self employed can be quite the adventure if looked upon in a positive frame. On the flip side it can also be like quicksand. It can consume you deeper and deeper into taxes and profits and bills and finances and so on forth. You have to be prepared for all of these consistent fluctuations in your new self employed business. In this article I will briefly explain what the self employment tax is and as well as some tips that may get you going in tax help.
The self employment tax is when you individually pay for your pay roll taxes. In this case you would normally have to split the pay roll taxes between employer and employee. The tax consists of a social security tax of 12.4% which would affect the very first $87,900 wages. This tax has been placed on net profit small business, self employed business, partnerships and so on forth. There are two separate self employment tax calculation methods. The first is called the short method, which must be calculated on the first part of the Schedule SE page. The second is called the long method, which must be calculated on the second part of the Schedule SE.
Now that you know what the self employment tax is, let us look at some ways you can save money and help your business progress with an ascending profit rate. The first thing you must note is that there are over a million deductions you can make with your own business. These deductions can completely lower your income tax and that way you will have much more profit. Everything and anything that is related to the expenses of your business can be deducted. Keep all the receipts and you can have all your money back. Everything you spend on supplies, transportation, subscriptions and so on froth you can have covered if you play the game right. You can also defer your income before you are thrown into a higher tax bracket, which of course will charge higher tax rates on you. Reach for money back from the Social Security tax you are paying. Since you are self employed you pay both parties (employee and employer) Social Security tax. On the flip side you can deduct almost half of all these taxes from your 1040 form.
As you become self employed, or perhaps currently are, think about the adventure and the power you have over your profits and money!