How to Pay Self Employed Taxes

Paying taxes, as a self-employed person, can be confusing.

People who own their own business, freelance or work as independent contractors are considered self-employed by the United States government. Self-employed citizens need to pay self-employment taxes. The tax form used for these taxes is the Schedule C, or the Schedule C-EZ. Self-employment tax provides funding for Social Security and Medicare benefits, typically deducted from an employee's paycheck.

Instructions

1. Maintain a record of all expenses relevant to your business, whether you are a freelance graphic designer, independent contractor or own your own jewelry store. Save all receipts relative to your business as well.

2. Keep a profit and loss statement. This type of document can be found at any public library, on the IRS website or can be kept as a Word document by you.

3. Put aside money for self-employment taxes every quarter. If you choose to pay self-employment taxes quarterly, you need to calculate 15.3 percent of your earnings. The amount calculated will then either be sent to the IRS quarterly or compiled and sent bi-annually or at tax time every year. Of the amount sent in for self-employment taxes, 12.4 percent of this amount goes towards Social Security and 2.9 percent goes towards Medicare.

4. Use your Social Security number to pay self-employment taxes or obtain an ITIN. An ITIN is an individual taxpayer identity number that is used by the IRS for self-employed individuals and businesses. If you do not have an SSN or ITIN, the IRS will issue you one. You will need to file a Form W-7, contact the IRS via their website and fill out an application for an ITIN.

References

• Internal Revenue Service: Instructions for Schedule C (PDF)
• Internal Revenue Service: Self-Employment Tax
• Social Security Online: If you are Self-Employed