According to the Pew Research Center website, there are about 16 million people in the U.S. who identify as self-employed. These numbers are similar to pre-Covid times, but the website argues that payrolls are now less. Yet this might change as businesses pick up in the U.S., and becoming self-employed is a solid gateway to entering the world of business.
If you are thinking about becoming self-employed, you will need to learn how to file self-employed taxes. In this post, we will teach you all the basics you need to know about filing your taxes as a self-employed individual. Read on to get the lowdown.
Doing Taxes As A Self-Employed Individual
When filing self-employed taxes, you will need your tax number, which is your Social Security number (SSN).
Plus, your business should have an employer identification number (EIN) assigned to it. If you don’t yet have an EIN, just follow the instructions given by the relevant government website.
Now here are the basic steps for filing taxes as a self-employed individual:
Step 1: Work Out Your Earnings
It’s good practice to have a method you use to keep track of your earnings in an organized and easily accessible way. if you don’t then your year-end tax forms will be helpful to figure out what you have earned.
You might receive a few tax forms depending on how you work. For instance, if you use PayPal or Stripe, you might receive a 1099-K that shows your payments.
Step 2: Figure Out Your Business Expenses
You need to figure out your business expenses so that you can make self-employed deductions. It’s a good idea to get into the habit of keeping track of your business expenses throughout the year to make life much easier when you fill out your tax return.
Even if you keep track of and manage your finances, it’s still good practice to run through your bank statements. You should also check out any credit card payments that you can classify as business expenses.
Step 3: Fill Out The Forms
There are a few forms you will have to fill out. Keep in mind, that if you earned less than $400 when self-employed in 2021, you won’t need to fill out any forms. As well, if you had only a W-2 income under $12,400, you won’t need to fill out tax forms either.
So some of the key forms you will have to deal with if you need to pay taxes are:
- Schedule C
- Schedule SE
There may be other forms you need to fill out. If you are struggling to know what to do about your taxes, we recommend you check out some expert services regarding unfiled IRS tax returns.
How To File Self-Employed Taxes The Right Way
The question of “how to file self-employed taxes” has different answers for people with various types of self-employment. If in doubt, you should reach out to professionals to guide you in the right direction so that you don’t make any costly mistakes in the long run.
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