Are you self-employed and not currently deducting taxes from your annual gains? This could certainly cause problems once tax season rolls around. There are many opportunities, however, for you to plan ahead and estimate your self-employment taxes. There are many things that you need to consider. For example, what are your profits and losses and how many deductibles do you qualify for?

It you consider yourself self-employed, legally you are responsible for your self-employment taxes. Self-employment tax would include Social Security and Medicare. Your estimated self-employment tax would be similar to what would be deducted if you held employment and received a W-2.

It is very easy to calculate your estimated self-employment taxes, and doing so will save you a lot of money and headaches. A Schedule SE, provided by the Internal Revenue Service, can aid you in estimating you self-employment taxes. The self-employment tax rate is as follows: 15.3% dedicated to Social Security taxes and 2.9% dedicated to Medicare. This information has been provided by the Internal Revenue Service.

You might wonder what Social Security and Medicare taxes are deducted for. Social Security taxes are dedicated to assist with older aged individuals, individuals with disabilities and survivors. Medicare is devoted to hospital insurance. As tax-paying citizens we are legally bond to pay these two special taxes. Is all of your income taxed? As of 2006, all of your self-employment income, up to $94,200, is subject to self-employment taxes.

If you are behind in filing your self-employment and decide now is the time to file, your self-employment earnings are subject to the use the regulations from that particular year. For example, if it is 2008 and you are filing 2007’s tax return, you must use the appropriate earning limitations that were sat in place that calendar year. On the same topic, if the tax rate or earning limitations alter during a particular calendar year continue to use the same rate that was in place prior to the change until the end of the year to calculate your self-employment taxes.

What deductions apply? If self-employed you are able to subtract up to half of your self-employment tax from your adjusted gross earnings. Only your income taxes will directly see the affect of this deduction.

Paying your self-employment taxes is easy. A social security number or a taxpayer ID number is required. The Internal Revenue Service has information on their website regarding how to obtain each one of these if you do not have either one. A taxpayer ID is used as an identification number if you are not eligible to obtain a Social Security number.

Estimated self-employment taxes can be paid as you earn the income. Some would call it pay as you earn. If you are self-employed and federal income taxes are not deducted from your earnings, it is very important that you are responsible and estimate your self-employment taxes. If you do not pay as you earn income throughout the year, expect to owe the federal government come tax season a hefty amount.

Are you required to pay self-employment taxes? If you work and consider yourself self-employed you are required to deduct self-employment taxes from any income exceeding $400. This would include church-related work. It is often a misconception that church employees are excluded from self-employment taxes. Use the SE form, mentioned earlier, to estimate and report your self-employment taxes. Self-employment taxes are subject to anyone earning a personal income, age is not a factor.

Do you consider yourself self-employed? If you practice a business as the only owner or if you practice a trade as an independent contractor, you are legally considered self-employed. Self-employment taxes are subject to these individuals. Persons that are in partnership with other individuals operating a business are included as well. The work does not have to be full-time and the business can be large or small. If you work full time during the week and receive a W-2 at the end of the calendar year but also run a lawn mowing service during the weekends – your part-time services would be subject to self-employment taxes. Self-employment taxes apply to all situations.