Self Employment Taxes

Self-employment taxes are only slightly more complicated than filing ordinary income reported on W-2s. I was expecting tax time to be really complicated, but with a little work and some free tax software, it was a breeze.

I filed a schedule C for my 2007 freelance writing income, simply adding up my freelance income and writing royalties for the year. It’s important to keep good records, since smaller clients don’t provide 1099 forms.

Here’s a quick article on how to take self employed tax deductions. While it isn’t exhaustive, it provides a good start and solid tips for basic self-employment tax deductions.

As a self-employed individual, I can deduct 100% of my health insurance premiums as well as half the amount I pay in self employment taxes (Medicaid and Social Security). I also deducted my new computer and half the cost of my internet service, which I use almost exclusively for my writing work.

I do my own taxes, but I highly recommend consulting or hiring a knowledgeable small business accountant if your self employed income is complicated. Also, you can receive valuable advice about payroll taxes, tax deductions, and other specific questions about your particular situation.

At the same time, keep impeccable records throughout the year in order to limit the time and money spent at tax time preparing your return. The more work you do throughout the year (usually just minutes a week) the more time and money you’ll save at tax time.

Self employment taxes are simpler than many realize. Current free tax software (check out TaxActOnline) will even calculate your quarterlies for the next year so you’ll know how much money to send in to the IRS every three months.

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