According to the Small Business Administration, out of 33.1 million small businesses, 27.1 million are nonemployer small businesses—that is, “self-employed individuals operating very small unincorporated businesses, which may or may not be the owner’s principal source of income.” That makes for numerous individuals who might need a little extra help at tax time to comply with specific tax rules for the self-employed and take advantage of tax planning opportunities.
The first few hurdles surround paying self-employment tax and making estimated tax payments. Typically, employers pay payroll taxes, which fund Social Security and Medicare. Employees also pay a portion to fund Social Security and Medicare—often known as FICA on their paystub. However, self-employed individuals are responsible for paying both the employer and employee portions on net earnings of up to $160,200 for 2023 and $168,600 in 2024, in addition to federal and state (if applicable) withholding for income taxes.
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