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Understanding Self Employment Tax

  Sanjiv Gupta CPA  Published 
Understanding Self Employment Tax

The word tax never fails not to scare us right? No matter however much money we are paying to the government as a tax it seems that whenever it’s time to pay back to the government there is some shiver that goes down the spine. But much of the fear is allayed when the necessary taxes are deducted from the salary itself and you don’t have to bother much about paying them yourself. But when the case is otherwise and you have to yourself tell the government about your earnings and then pay the relevant taxes, it becomes a bit scary then. So definitely it not only sounds scary but quite draining as well.

How Does One Go About Paying Self Employment Taxes?

If you are self-employed and you do not draw monthly cheques under a company then you have to individually make arrangements for getting your taxes paid. This may sound tough but as you systematize and organize the important documents, the task of you paying your taxes is not that difficult anymore.  What is important is knowing when to pay them

If you are self-employed then such taxes may be paid throughout the year. If you are making a good living out of your self-employed incomes or earnings, which is again registered as your primary income then probably you have to pay the scary taxes. Also, you can only skip the quarterly taxes at the risk of paying heavy fines during the tax-paying time.

As a self-employed individual one has to also pay social security and medicare to the government out of their incomes. The best thing to allay your self-paying tax fears is to stash away those essential bucks to be used only during tax time.

Not all is bad for self-employed persons!

Yes in such cases you may have to pay only half of the entire tax burden. Also, you are liable to face deductions if you are using your home office, other business expenses or purchasing your own health insurance schemes. The only thing that ought to be kept in mind here is keeping all the papers ready for audit time.

If all the above is a little complicated for you then you better consult an attorney to secure legal advice.