Tax Basics

Managing taxes is an important part of running your own business. Below we’ve answered a few FAQ’s and collected some helpful guides and tools we’ve found.

What taxes do I pay?

As a self employed worker you will pay Federal, State income tax along with Self-employment tax. Your exact rate will vary based on a number of factors but most people pay between 20-40% of their self-employed income in taxes.

Since your taxes come out of your profit, using a calculator to estimate your tax rate will help you understand how much you have to save for taxes.

How to pay and file taxes?

If you are self-employed, the IRS requires you to pay quarterly estimated taxes four times a year. You can make these payments on IRS.gov. Knowing how much to pay can be tricky. You can hire a CPA to estimate them or you can estimate yourself using this IRS worksheet . At the end of the year you are required to report all self-employed income and expenses on a Schedule C as part of your personal tax return. There are apps such a Ruby Money and Keeper who can also help you stay on top of self-employed taxes.

What are some best practices for staying on top of taxes?

‍To stay on top of your taxes and avoid costly mistakes, you can follow a few best practices:

• Estimate your tax rate and make sure you are charging clients enough to cover taxes.
• Set money for taxes aside each time you get paid and make estimated tax payments each quarter.
• Track your business expenses and take advantage of tax-free retirement programs to lower your taxes.

Resources and Tools IRS Self-employed tax center Self-employed tax calculator