Are you a self-employment seasoned pro who knows all about the tax implications of working for yourself, or are you just getting started? Test your self-employment tax knowledge with the quiz below, and then learn tips on how you can take the stress out of quarterly taxes so you can focus on your business.
True Or False
1. Self-employment taxes must be paid each quarter?
TRUE. Self-employment taxes are due each quarter. If a 1099 worker waits to pay all self-employment taxes at the end of the year, there will be a penalty.
2. The next quarterly self-employment tax deadline is December 31, 2019?
FALSE. The next quarterly self-employment tax deadline is January 15, 2020. You can find the full schedule of quarterly tax deadlines on the IRS website.
3. A Tax Form 1099 is a summary of the money that I have been paid and the amount I will need to pay in taxes?
FALSE. A 1099 form is used to report non-salary income to the IRS for tax purposes. It will not tell you how much you owe in taxes.
4. If I make more than $600 on a project, a client or employer must send me a Tax Form 1099 before the tax filing deadline?
TRUE. If an independent contractor is paid more than $600 in a financial year, they’ll receive a 1099-MISC. Examples of independent contractor employers you may recognize include Lyft Inc (NASDAQ: LYFT), Uber Technologies Inc (NYSE: UBER) Etsy Inc (NASDAQ: ETSY), and Airbnb.
5. If I work for a rideshare company like Uber or Lyft, I only need to pay federal and state taxes?
FALSE. You must pay income tax (federal and state taxes) and self-employment tax (Social Security and Medicare tax) on the net profit you earn from your ridesharing business.
6. Business expense deductions can alleviate some of the hefty tax payments for freelancers?
TRUE. Here are some deductible expenses: equipment purchases, office supplies, mileage, and business meals.
How did you measure up? Are you smart about self-employment taxes or do you need to learn more? By strengthening your financial know-how, you’re already taking the first step toward successful self-employment and financial future. You may have already gotten started with AARP Foundation Self-Saver, but you may not be taking advantage of all the ways it can help you manage your business more efficiently. Here are quick tips to help you maximize Self-Saver so you can spend more time focusing on your business, and less time worrying about taxes.
Link Your Bank Account(s):
Linking your account(s) through the SSL secure server will give you access to Self-Saver’s simple, automated bookkeeping service, which includes the recording, storing, tracking, and retrieving of financial transactions associated with your self-employment earnings. Expense tracking and itemization will allow you to deduct from the quarterly taxes you owe and decrease your total tax bill. And no more piles of disorganized receipts!
Set Up Automatic Withholding
With Self-Saver withholding suggestions, one-click lets you withhold the correct amount of self-employment earnings in an FDIC-ensured bank account. Tax withholding, or setting aside money based on the Self-Saver estimate, help you to avoid tax penalties or money owed at year-end.
Automate Quarterly Tax Filings
After you set up automatic withholding, Self-Saver will remind you when it is time to file and will manage the whole process for you so that you will never miss a quarterly tax payment again. You can file your taxes directly to the IRS, or use Self-Saver and submit them automatically.
Working for yourself doesn’t mean going it alone. With tools like Self-Saver, you’ll have the resources and support you need to be a self-employed success story.