Do you have a side gig (part-time job)? If yes, most likely, you have to pay Self-employment tax (SE tax) and also income tax since you are self-employed. Even if you work a full-time job, you can still be self-employed with your side job. I'll cover how to calculate your self-employment tax in this short video.
Your self-employment tax is 15.3%. That rate comes from adding 12.4% for Social Security and 2.9% for Medicare. Self-employment tax applies to net income or net profit. The fast way to calculate your self-employment tax is to take your net profit and multiple the profit by 14.13%.
Example: Gross income for being self-employed is $26,000. Your deductions are $6,000. That leaves you with a net profit or net income of $20,000. Take 20,000 and multiply by 92.35%. Now take the $18,470 and multiple by 15.3%, and that is your self-employment tax. $18,470 x 15.3% = $2,825.91. I rounded to $2,826.00 in the video.
Examples of self-employed side hustle jobs:
RU-vidrs
Rideshare driver - Uber or Lyft
Delivery driver
Wedding Photographer on the weekend
Dog walker
Sell items online
Graphic designer
Online writer
Virtual assistant
Chapters:
0:00 Intro
0:42 Quick method
1:15 Schedule C - Net Profit
4:00 Schedule SE
4:38 SE tax calculated in Excel
5:01 Social Security and Medicare taxes
6:25 Why 92.35%?
7:48 Pay taxes quarterly
Most likely, you need to pay your taxes quarterly to the IRS. I'll discuss paying your taxes online in another video.
Terms:
Net Profit or net income - Gross income minus your deductions. This is done on Schedule C.
1099-NEC Form - Non-employment compensation form. You usually get it annually in January and have to claim this as Gross Income on Schedule C.
According to the IRS, who is self-employed?
Generally, you are self-employed if any of the following apply to you.
- You carry on a trade or business as a sole proprietor or an independent contractor.
- You are a member of a partnership that carries on a trade or business.
- You are otherwise in business for yourself (including a part-time
IRS webpage www.irs.gov/businesses/small-...
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11 июл 2024
