James Maertin, C.P.A.

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Self-Employed  


To get started, please fill out a tax questionnaire.

If you work for yourself, you are considered self-employed.  A self-employed persons include those known as independent contractors or as sole proprietors of an unincorporated business.  A big advantage to this status is that you can deduct business expenses almost without limitation.  For ideas on deductible business expenses, please have a look at my extensive list of Deductions.

However, being self-employed also means that in addition to income tax, you will have to pay your own social security and Medicare taxes (known as self-employment tax when they apply to self-employed people).  If you were an employee, your employer would pay 7.65% of your wages for social security and Medicare, and another 7.65% would be withheld from your pay, but as a self-employed person the full 15.3% is assessed on your net income (gross income minus business deductions) from self-employment. 

Nevertheless, since this is computed on your net self-employment income, rather than on gross income, you may not be that much worse off, especially if you have a lot of business expenses.  Also, you are allowed to deduct half of the self-employment tax, so the effective rate becomes closer to 13%.  In any case, I will calculate these amounts on your tax return. 

If you have substantial self-employment income you probably should start making quarterly estimated tax payments.  I will provide you with  payment vouchers when your tax return is ready.

It is important to keep detailed records of your income and expenses for 3 years.  The IRS will want to see them if you are audited.  Be aware too that if the IRS determines that you have underreported your gross income by more than 25% they can go back 6 years in an audit.