Tax Day 2024 and How to Get an Extension from the IRS
Tax Day is on Monday, Apr 15, 2024. Not ready to file? Submit an electronic request to the IRS for an extension ASAP!
Self-employed individuals are subject to different challenges when it comes to taxes. Staying diligent and keeping accurate records can go a long way in easing the frustration.
In 2023, nearly 16.4 million Americans are considered self-employed. That’s about 10.1% of the workforce. If you are self-employed, you are required to pay a special tax on top of other taxes at the federal and state level: self-employment tax.
It’s simple; if you are self-employed, you have to pay self-employment tax. But what classifies as being “self-employed”?
You are self-employed if you are an independent contractor, sole proprietor, or a member of a partnership. Note, if you are self-employed you must pay self-employment tax if you made more than $400 in one year.
Self-employment tax is a 12.4% Social Security tax plus a 2.9% Medicare tax on net earnings. Social Security is only taxed on the first $160,200 you earn in 2023. So the total self-employment tax is 15.3% on the first $160,200. After $160,200 you still continue to pay the Medicare tax portion that is 2.9% or if you earn more than $200,000 (or $250,000 for married couples filing jointly), there’s an additional 0.9% tax.
Below is a breakdown of self-employment tax for 2023:
Rates for self-employment taxes can change year to year, so check out PaycheckCity's tax resources to stay up to date each year.
The process for paying and accounting for self-employment tax is slightly different than if you were employed by a company.
Of course, you will need the basics like a social security number or an individual taxpayer identification number (ITIN). You will make estimate payments for self-employment tax quarterly. Use Form 1040 - ES to help you make these estimates.
Estimates for self-employment tax are due April 18, 2023 for the first quarter, June 15 for the second quarter, September 15 for the third quarter, and January 15, 2024 for the fourth quarter.
As a self-employed worker, you must adhere to specific taxes. Because you pay self-employment taxes, does not mean you are off the hook for other taxes. Self-employment taxes only cover Social Security and Medicare taxes. To comply with federal and state regulations you still must pay federal, state, and local income taxes.
When you pay self-employment tax, you are paying the employer half of Social Security and Medicare because you technically do not have an employer. The good news is you can deduct the employer portion as a business expense on your income tax return. Self-employed individuals are subject to different challenges when it comes to taxes. Staying diligent and keeping accurate records can go a long way in easing the frustration. Try our paycheck modeling calculators to help determine your tax withholding.
Tax Day is on Monday, Apr 15, 2024. Not ready to file? Submit an electronic request to the IRS for an extension ASAP!
IRS has updated tax brackets for 2024. See how this affects your first paycheck this year!
Check out the updated 2024 Federal benefit limits for 401(k), HSA, and simple IRA, and more. Stay informed and plan your finances with confidence!