If you’re self-employed, you’re probably all-too-aware of the pain that comes with filing business taxes. As an independent contractor, you not only face a significant tax burden from the IRS, but also the prospect of navigating a complex, intimidating tax code that changes every year.
Fortunately, we’re here to help. With the 1099 Misc Tax Calculator for 2019, you can take the hassle out of calculating your self-employment taxes and be better prepared when it comes time to file.
Using the 1099 Misc Tax Calculator
Using the 1099 Misc Tax Calculator to determine your 2019 taxes begins by understanding what self-employment taxes are—and why they can sometimes amount to such a jaw-dropping bill at the end of the year.
What are self-employment taxes?
Self-employment taxes essentially boil down to two things: Medicare and Social Security.
And if you had been employed by someone else during the past year, a percentage of the payroll taxes that pay for Medicare and Social Security would have automatically come from your salary, while your employer would have absorbed the remainder.
But as your own boss, no one is around to share that tax burden. In other words, you’re responsible not only for the employee’s portion of those taxes, but also the employer’s portion—a requirement that can boost your tax rate up to 15.3% on the first $132,900 of your net business income (as well as an additional 2.9% on net income exceeding $132,900).
So, when it’s time to use the self-employment tax calculator to figure your taxes, note that you’ll owe:
- The employee share of Social Security tax, which amounts to 6.2% of the first $132,900 of your net income
- The employer share of Social Security tax, also 6.2% of the first $132,900
- The employee share of Medicare tax, or around 1.45% of net income (no income limit or cap)
- The employer share of Medicare tax, or 1.45% of net income (no income limit or cap)
In short, Social Security and Medicare taxes can take a big chunk out of your 2019 net income. Using the right self-employment calculator is crucial to understanding what to expect before filing your return.
Reducing Your Self-Employment Taxes
There’s no doubt that self-employed individuals face a much higher tax burden than others. But by plugging a few key deductions into the 2019 Misc Tax Calculator, you can reduce your self-employment income and lower next year’s federal taxes.
Some of the more common deductions available to self-employed professionals include:
- Office equipment and supplies
- Travel expenses
- Home office expenses (utilities)
- Permits and licenses
- Educational materials and expenses
- Marketing and advertising materials
Whether you’re a freelancer, independent contractor or operate as a sole proprietorship, qualifying expenses can help reduce your income and ensure you’re not paying more than you have to.
And with our self-employment tax calculator, you can take an important first step to prepare for whatever the IRS throws your way.
To learn more about the 1099 Misc Tax Calculator and calculating your self-employment taxes, visit your local Liberty Tax® office today.