If you have a traditional job and receive regular paychecks, chances are you likely don’t spend much time worrying about Social Security taxes seeing as how they’re automatically deducted from your income each pay period. However, if you are self-employed, paying your taxes and reporting your earnings is quite a bit different in the sense that everything falls on you. Rather than having an employer or specified department in charge of automatically reporting your wages and sending monetary contributions to the Internal Revenue Service (IRS) on your behalf, you must complete these obligations yourself when filing your federal income tax return every year. It’s really not all that different from filing a typical tax return once you get the hang of it!
The term self-employed pertains to any person who operates a “trade, business, or profession,” whether they are the sole proprietor or working with a partner. If you’re considered self-employed, one of the first things you must do is accurately determine your net earnings so you know exactly what to report to the IRS. Surprisingly, not all income counts for Social Security, such as interest from loans or rentals from real estate, and is better left out when compiling your total net earnings. Once the final calculations have been established, you must report your earnings to the IRS by completing and submitting the appropriate forms during your annual filing. Form 1040, Schedule C forms, Schedule SE forms, and any other necessary documents you might need can all be obtained through the IRS website.
Above all, the most important thing to remember is that if you want to be able to take full advantage of Social Security benefits later in life, accuracy when filing your annual taxes is everything. Every person’s situation is different, therefore your tax returns may not be the same as everyone else’s. If you are newly self-employed, or you’re struggling to understand exactly what is expected of you this upcoming tax season, you need to reach out for help from a qualified professional.
Filing taxes is never fun, but if you’re self-employed your future Social Security benefits may depend on you making sure the process is done right. If you have any legal questions regarding Social Security, or if you are interested in attaining an attorney for any Social Security related dispute, we encourage you to reach out to one of our remarkably competent attorneys at Harris Law as soon as you can. Call 231.347.4444 or fill out the free consultation form in the sidebar to schedule your free personal consultation.