FOUR KEY TAX ISSUES FOR SELF-EMPLOYED INDIVIDUALS, ACCOUNTANTS’ DAILY NEWS, SEPTEMBER 25, 2019

  1. Income Tax:  Yes, you will owe federal income tax and state income tax if your state has one, just like other business owners. However, if you maximize available deductions you don’t have to pay tax on the full amount of your net income.
  2. Self-Employment Tax:This is the same amount of Social Security and Medicare regular employees pay. The self-employment tax rate is 15.3 percent of the first $132,900 of income and 2.9 percent of income about that for 2019. Thank goodness you can deduct half of that self-employment tax on your annual tax return.
  3. Other Payroll Taxes: If you employ workers as many self-employed individuals do you must pay half of their Social Security and Medicare taxes, plus unemployment tax, and in many cases, temporary disability tax as well. In addition to that, your responsible for withholding the required payroll taxes and depositing them with the IRS. To make matters worse, if you don’t meet these obligations. You could be hit with a “trust fund penalty”. A Trust Fund Penalty holds you personally liable for underpayments due to willful failure. Advise Tip: Pay the IRS before other creditors to avoid disaster.
  4. Sales Tax: States generally impose their own sales taxes, at the very least, you must observe the laws for your home state. You are also responsible for collecting sales tax in a state where your business maintains a physical presence. Sales tax has sparked controversy for online sellers. Recently however, the U.S. Supreme Court overruled the physical presence requirement for online sellers. States now have a right to require sales tax collection from remote sellers that do not have a physical presence in their state.

 

 

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