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Today's topic is all about being self employed and Estimated Taxes.
Well for those of you who are self employed working for yourself (i.e.: independent contractor) etc. You are responsible to pay your own taxes. The IRS calls these estimated tax payments. They are due quarterly, four times a year. Surely that is easy to do right?
Being self employed is wonderful but it does come with its own set of challenges and one of these is learning to set aside money to pay in taxes. No one likes to pay taxes but its unfortunately a fact of life no matter where you live in the world.
If you don’t pay in your taxes (Fica, Medicare and Social Security tax) you don’t fund your social security account, meaning you don’t earn credits. Forming a new habit can be difficult but with a little understanding and effort on your part, you will find it will save you stress and money.
All you need to do is deduct a portion of the income you receive for estimated taxes. Well, how much do I set aside? A good rule of thumb is to put aside 20% of the weekly, biweekly, month etc. of your earnings. So, when the estimated taxes are due you have the funds to pay them. Below are the due dates.
Jan 1 – March 31st Due 15th of April
April 1 – May 31st Due 15th of June
June 1 – August 31st Due 15th of Sept
Sept 1 – Dec 31st Due Jan 15th, 2023.
By paying in estimated taxes on time, you are essentially building up a credit for yourself. Meaning when you file your return, and you file with a schedule c (writing off any expenses). The estimated taxes are applied to any balance you may owe. In some cases, you may not even have a balance depending on how much you write off. Your goal at the end of the day is to not owe in taxes period and or to break even or owe very little or get a tiny refund.
To talk about your tax situation please give us a call and leave a message if no one answers. 904-374-8960
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