All Posts tagged tax accountant

How Do Self-Employed People Pay Taxes?

How Do Self-Employed People Pay Taxes?

Individuals working traditional jobs will generally have their taxes withheld automatically by their employers. You should be able to easily find the amount of income tax withheld by inspecting your tax documents.

However, what happens if you do not have an employer? How do you go about paying taxes if you are self-employed?

Just like those traditionally employed, those self-employed do indeed need to pay their taxes. Generally, the individual will be responsible for tracking how much they owe. Because of the challenges this can bring, many choose to work with a personal accountant to help pay their self-employment taxes.

If you are self-employed, here’s what you need to know about paying your taxes in Texas. 

Who Has To Pay Self-Employment Taxes?

If you make your income without an employer, you’re probably going to have to pay self-employment tax. Here’s a short list of types of workers where self-employment taxes may apply: 

  • Independent contractors
  • Sole proprietors of a business or trade
  • Members of a partnership that carries on a trade or business
  • Gig workers
  • Part-time business owners

While most employees receive a W-2, contractors and business owners will have a few different forms they will need to properly file their taxes. These can include a 1099-NEC, Form 1040, or 1040-SR. 

A tax accountant can help you if you’re unsure where to start.

How Much Is the Self-Employment Tax Rate?

The self-employment tax rate is typically around 15.3%, which is paid into Social Security and Medicare. However, this is higher than what traditional employees pay. That’s because employees pay half of this tax while the employer pays the other half.

To counter this issue, you can deduct 7.65% of your income to pay the employer’s half. This reduces your taxable income, so you pay a bit less in taxes.

What Taxes Do Self-Employed People Pay?

Those who are self-employed pay similar taxes to other traditional employees. Here are the various types you can expect to pay while self-employed:

  • Self-employment tax
  • Income tax
  • Sales tax
  • State tax (where applicable)

Income and sales taxes are paid by every working American, while self-employment tax only by those who fall under the category. Most states have a sales tax, but some counties and cities will have their own sales tax on top of that.

How To Calculate Self-Employment Taxes

This can be a bit tricky, so don’t be afraid to contact a personal accountant if you’re overwhelmed or afraid of making a mistake:

  1. Calculate your net self-employment income by subtracting your expenses from your gross income.
  2. Find your tax bracket by determining how you will be filing and your income. The rates are different depending on your situation (ex. single filer versus filing jointly)
  3. Figure out if your net earnings are over $147,000 since you will need to calculate anything above that at a different rate.
  4. The self-employment tax rate is 15.3% for net income under $142,800. If you make over that, any additional income is taxed at 2.9%.

Trust Gonzalez & Arrambide With Your Self-Employed Taxes

If you’re worried about the IRS coming after you, there’s a simple solution. Trust the professional tax accountants at Gonzalez & Arrambide. We can help you file your self-employment taxes with confidence. Don’t delay, contact us today for your free consultation!

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Tax Day Is Coming! What Documents Do You Need

Tax Day Is Coming! What Documents Do You Need

It’s that time of year again! Tax Day is approaching on April 18th and you need to file your taxes before time runs out. Now is the time to get all your ducks in a row to complete your tax preparation or opt for professional help with filing.

The very first thing you need to gather is all your tax-related documents. Which ones you need will depend on your financial situation and employment. For instance, business owners and those who are self-employed will need to gather additional information. 

The team at Gonzalez and Arrambide, Inc., wants you to know which documents are necessary for tax preparation.

Proof of Income (W-2, 1099-NEC, etc.)

Most people who are traditionally employed will receive a W-2 form from each job they have. However, self-employed people and business proprietors will need to have their 1040 on hand. If you’re an independent contractor, you should have a 1099-NEC form available. 

It’s important to note that there are a variety of 1099 forms that cover the various ways you are obtaining income; from rental income to payouts from a retirement fund, there is likely a 1099 form for that.

If you’re getting your tax preparation done by a Weslaco accountant, bring every form you’ve received. You can also bring any receipts or other records if you’re unsure whether it needs to be reported.

Deductions

Do you have kids or other dependents? You’ll need to claim them on your taxes, just be sure you have all their information available to you, including: full legal names, dates of birth, and social security numbers. If you share custody of your children, you’ll need to discuss which parent will claim them.

If you own a business or spend a lot on expenses for your job, you’ll be able to claim a number of deductions on your taxes. 

Charitable donations, major purchases, and some life events — like paying for college — can also be deducted.

Our experienced tax accountant can help you find additional deductions you may not have even thought of!

Other Tax Documents You May Need

Every individual’s situation is unique, so you may need additional documents to properly complete your taxes. 

Businesses can see their taxes change depending on how their year went. If you expanded, the IRS wants to know. Even gambling wins need to be reported! There’s nothing wrong with gathering more documents than you think you need. Critical financial information can come from a variety of sources. 

If you want to make sure you remember everything you need, hire a Weslaco accountant to keep your finances on track. As a bonus, it makes Tax Day way easier!

Identification

If you’re doing your tax preparation, all you need is your full name and social security number. If you’re getting help with filing taxes, then you will need to provide some information to the preparer.

Your Weslaco accountant at Gonzalez and Arrambide, Inc., may have more requirements, but these are the basics:

  • your social security number or Taxpayer Identification Number
  • a government-issued photo ID; a passport, state ID, or driver’s license will work
  • 2020 and 2021 tax returns if you have them
  • your Identity Protection PIN if you were issued one
  • ID, social security number, and birth date for your spouse if you are filing jointly
  • social security numbers and birth dates for your dependents (children)

Dread Doing Taxes? Let Gonzalez & Arrambide Help!

If you don’t want to deal with the headache of Tax Day, let Gonzalez & Arrambide, Inc., take care of filing your taxes. Our CPAs can help you prepare, file your taxes, and make sure you succeed this tax season. 

As a bonus? We can help you year-round with our bookkeeping services! Our CPAs work with individuals and businesses to get ahead of their finances. We help with everything from investments to audits and everything in between. Taking advantage of our bookkeeping services also means you’ll have a leg up next tax season.

Don’t wait, see what we can do for you!

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