Overview

Whether you’re new to the world of self-employment, or just looking for a quick tax refresher, this is the perfect place to be! For 2019, self-employment (SE) tax is 15.3%. SE tax is made up of Medicare tax (2.9%) and Social Security tax (12.4%). Normally, when you’re employed by someone else, that employer covers half of the taxes and the other half is taken out of your paycheck. Being self-employed, you have to float the whole tax bill. Well… almost all of it. The IRS really only applies SE tax to 92.35% of your net income. You may also have to pay income tax depending on how much you earn and what your filing status is (single/married).

Standard/Itemized Deduction

On your personal tax return (1040), you can take either the itemized deduction (certain actual expenses), or the standard deduction. Since the standard deduction was increased to $12,000 single and $24,000 filing jointly, most people found it beneficial to take the standard deduction this year. Both deductions are a deduction against your net income and are used to figure out how much income tax you will owe. These deductions are separate from business deductions. You are allowed to take the standard deduction against your net income and also business expense deductions against your business income.

Self-employed Deductions

Being self-employed means you have your own business (even if you don’t create an LLC). Your income and expenses will be reported on a Schedule C (Profit/Loss from Business). If you spent $100 on supplies for your business, you can deduct $100 from your income (given they are necessary and ordinary business expenses). Make sure you have receipts for anything you claim as a deduction. The IRS indicates that you should retain receipts for 3 years from the date of filing. Receipts can be kept in paper and/or digital format.

Contact Us

Do you have tax questions, need help with tax preparation, or have tax resolution problems? Reach out to me at Chad@YourTaxPrep.com or 801.580.6163. Our tax firm is based in Salt Lake City, UT, but we are able to provide help to our clients anywhere in the world.  For more information about our pricing or to contact us through the website, feel free to check out those pages.