• July 25, 2016
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Self-employed individuals are those who carry out a trade or business as an individual contractor or a sole-proprietor. Similarly, those who have a part-time business, or are a partner in a business, are also considered self-employed. Being their own bosses, a lot of self-employed people are unsure about their tax obligations, which is the reason we have put together this post, answering six most frequently asked questions we receive from self-employed taxpayers.

1. What are my tax obligations?

Self-employed individuals are required to pay both income tax and the self-employment tax (SE Tax). The SE tax refers to the Social Security and Medicare taxes and not the income tax.

2. How to determine if I am subject to any taxes?

To find out if you are subject to income tax and self-employment tax , subtract your business’ monthly expenses from profits.  If the profit is $400 or more, you are required to file your income tax return. If it’s less, you don’t have to file your income tax return, unless you meet any of the filing requirements listed in Form 1040 instructions.

3. Are self-employment tax Tax and Income Tax the same?

No. self-employment tax tax refers to the Medicare and Social Security taxes that all self-employed individuals are expected to pay to the Social Security Administration. In addition to the self-employment tax , self-employed individuals are also required to pay an income tax, depending on their overall earnings.

4. What if I incurred losses?

If your expenses are more than your what you earned, you can deduct the losses from your annual gross income on Page 1 of Form 1040. The losses, however, are limited in certain cases, and you cannot deduct the entire losses incurred from the gross income. To learn more about the limitations, you may visit the official website of IRS and see Pub 334 Tax Guide for Small Businesses or speak with one of our tax consultants.

5. Do I need to make quarterly estimated tax payments?

Self-employed individuals are required to make these payments as they do not have any employer to withhold their taxes. To find out whether you are supposed to make a quarterly estimated tax payment, use the worksheet in Form 1040-ES (Estimated Tax for Individuals). You would also require previous year’s annual tax return for filling out the form. If this is your first year as a self-employed individual, and your wrongly estimated your earnings, you must complete another Form 1040-ES to recalculate the taxes for the next quarter.

6. What forms should I use for filing my returns?

Self-employed individuals must use Schedule C or Schedule C-EZ to file their annual tax return. Both Schedule C and C-EZ will help you report income or loss that you made from your business or profession. The Form C-EZ is specifically used by small businesses and statutory employees with expenses equal to or less than $5000.

Must Read: A Brief Guide to Choosing the Right Tax Form

Need Expert Help in Filing Your Taxes?

Whether it is your first year being self-employed or you have been your boss for years, if you are facing any issue in filing your taxes, feel free to get in touch with one of the tax experts at the Law Offices of Nick Nemeth for a free no-obligation consultation. To reach us, simply call (972) 627 4784 or write to us at info@myIRSteam.com. You may also fill out our contact form and we’ll take it from there.

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What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
The Nemeth Law team is exceptional. They treat their clients like a family member who is in crisis. They want you to get the best possible outcome. I really appreciate everything that they did for me. Jake and Ashley had the greatest role in my case and it all turned out for the best for me. Thank you Nick and team for easing my fears and getting me through the long process. I'm truly grateful.
Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
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