Want to know how much self-employment taxes will cost this year? First, know how much income is actually subject to being taxed by the government. Even in traditional employment, workers must cross a certain monetary threshold before they are required to pay income or other types of taxes. It’s true: some tax payments are avoidable.
Avoidable Self Employment Taxes
It’s possible that only some of the income earned by a professional is subject to the self-employment tax (which is almost 14% of net earnings). According to the US government, only net earnings exceeding $400 are subject to this tax. Church employee income must be taxed if the total amount is greater than $108.28. Only the first $106,800 earned is subject to standard social security taxes, though this break does little to help average self-employed professionals.
Read the language carefully. Self-employment income earned from a single source must exceed $400 before it is subject to tax. This means that professionals who earned $399 or less through a single employer in a single year in the course of self-employment need not claim this income. When it comes to lessening those tax payments, every little bit helps – and this why a little bit of knowledge can be a very strong budgeting tool.
Using Tax Breaks
Even when professionals pass the $400 mark and claim all of their income, there are lots of ways to reduce those tax payments. Most taxes aren’t avoidable, but completely busting the budget on them is. Learn how to use self-employment deductions to save money legally.
Equipment. All work-related equipment purchases, from pencils to brand-new laptop computers, are tax-deductible when they’re purchased for the sake of self-employment. Office chairs, paper, stamps and envelopes – save the receipts, and lessen that tax payment.
Car mileage. Even those who work at home aren’t confined to their homes because of work. It may be necessary to travel to the store to buy supplies, and it’s always a good idea to record the length of this trip because it is also tax-deductible.
Health insurance. As Americans are keenly aware, health care costs a lot of money. Those who work for themselves can deduct some of this cost if they provide their own insurance, etc.
Home office costs. Many self-employed professionals maintain a high-speed Internet connection, homeowners’ insurance, electricity…the list may go on and on. At least some of these costs can be deducted by self-employed professionals who chiefly work at home.
Self-Employment Facts and Fiction
The self-employed don’t pay taxes! Full-time self-employment is easier than working part-time for someone else! Work at home jobs are easy to get! Sound too good to be true? That’s only because it is. Learn how to separate the self-employment facts and fiction…before it’s too late.
Self-Employment: The Fiction
There are lots of myths surrounding self-employment, and even more facts that are hardly mentioned at all. Many professionals find themselves establishing a work at home career, home-based business or other forms of entrepreneurship and learning some of these facts a little too late. Find out everything that’s not true about self-employment:
The self-employed can’t receive unemployment benefits. This is fiction! Self-employment assistance programs work just like state-sponsored unemployment benefits, and work at home professionals can obtain these benefits under the same set of requirements. Individuals should talk to their state government to learn how to receive these benefits.
Independent contractors don’t pay income taxes. It’s true that self-employed professionals of all types (yes, even business owners) are compelled to pay the self-employment tax…but, they are also required to pay standard income taxes as well. Often, independent professionals do not receive standard paychecks with taxes deducted, instead of earning monies in a gross sum. These workers are required under law to claim this income and pay subsequent taxes on their own, however.
Work at home is easy. Perhaps, unfortunately, this is also a bit of fiction…but only as far as perception goes. For instance, it’s much easier to work at something that’s loved, for oneself, than it is to do a job that’s only mildly tolerable for someone else. Self-employment in all forms requires hard work. It takes time and perseverance to find work at home jobs, establish a reputation and build a great resume. It’s not easy to work alone, even at home, but it can be very rewarding.
It takes money to make self-employment work. This is patently untrue, though many believe this when trying to start out in self-employment. Many works at home scams promise packages, products, books, Web sites – anything and everything – as a way to help others establish home-based businesses. Remember this: no legitimate employer will ask their employees for money. Period.
The Facts of Self-Employment
Learn how to separate the myths from the meat when it comes to self-employment. It’s possible to discover the truth about being self-employed before it’s too late and a mistake has already been made. Before spending money or earning money through independent efforts, find out about health care, self-employment taxes, insurance concerns and other issues that will arise. Don’t get bogged down in all the fiction- do the research, ask questions and find the answers.
