Ten Small Cities to Start a Business in 2023
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Are you self-employed? Did you make more than $400 last year? Learn about self-employment taxes.
Are you self-employed? Did you make more than $400 last year?
Congratulations, you must pay a self-employment tax! Just like average wage earners, self-employed citizens must pay Social Security and Medicare taxes. However, the rate and qualifications are different.
Unlike those whose taxes are figured by their employers, self-employed workers must determine the tax. To do so, use Schedule SE or Form 1040. The first $118,500 of your wages are taxed at a 15.3%. For 2016, that number will likely increase to $123,600.
This rate consists of 12.4% for Social Security and 2.9% for Medicare. The number is much higher than an employee working in a company, because self-employed individuals must pay all Social Security and Medicare taxes themselves.
When it comes to this tax – like everything in the payroll world – rates and rules depend. An extra 0.9% is taxed to earners whose status is filed as single and make above $200,000. For a married-joint-filing couple, this additional Medicare tax is added on when their income reaches above $250,000. Essentially, the more profitable you are as a self-employed person, the more taxes you’ll pay.
For more information, visit the IRS’s page on self-employment taxes here.
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Your filing status is perhaps the most important piece of information when it comes to tax withholding. Learn which filing status applies to you.
How often should you submit a new W-4? What is your filing status? In this article, we break down some of the most common W-4 questions.