Toward the end of the year, many start to think about holiday parties and shopping days. But for the work at home professional, the end of any year carries a slightly more sinister tone. Another fiscal year is coming to a close, and that means it’ll be time to get squared up with the government soon enough. Paying for the self employment tax can be pretty painful for those who don’t know what to expect and don’t know how much it costs.
Work at home doesn’t come cheap - just ask those who have been making their living from it for a year or more. While many are looking forward to tax returns in the spring, many of those who work at home are grimacing and gritting their teeth. Don’t know how costly paying for the self employment tax can be, or even what it is?
It’s time to do the math - before it starts to undo the work at home budget.
How Much is the Self Employment Tax?
Paying for the self employment tax is impossible for work at home professionals who don’t know how much it is or how to figure it out. Even with the formula, however, finding out much the self employment tax might cost can be fairly harrowing. Remember that the amount is determined by net income - that’s the amount made through work at home, minus all the expenses incurred through the course of work at home.
The entire amount left over is used to determine how much the self employment tax might cost. First, net earnings as a whole are multiplied by 92.35%. Write the resulting amount down - this is the net earnings for the year.
On to the next step in figuring out how to begin paying for the self employment tax. If more than $76,200 was earned on the year through work at home and self employment, multiply the overage by 2.9%. Any earnings under $76,200 should be multiplied by 15.3%. Add up both totals from this, then add that total to the sum obtained from the first step (when net earnings were multiplied by 92.35%).
The total figure which comes up is the cost of the self employment tax for that year. How much is the self employment tax? It changes every year and it’s based on earnings - and sometimes, it can seem quite costly to the work at home professional. The tax adds up to about $14 on every $100 earned. But don’t forget there are other tax costs associated with self employment as well.
Work at Home Doesn’t Come Cheap
Professionals who work at home and/or maintain self employed status must also pay the same income taxes everyone else pays - self employment tax notwithstanding. This means that work at home professionals will still owe a percentage of their total income to their government of residence. Often, this amount must be paid at year’s end, as many self employed professionals are independent contractors who do not have taxes taken out of paychecks.
To lessen the burden, professionals can make quarterly or monthly payments toward their taxes using last year’s tax return as a guide. It’s also a good idea to look into self employment loans, grants and other programs that provide financial relief. Since the taxes for self employment alone add up to about $14 for every $100, it stands to reason that professionals should set at least this amount aside in preparation for tax time.
 |
