Self-employment is currently the best option for people worldwide. The flexibility and profit that come with a sound business strategy are mostly unmatched. To ensure that you are on the right side of the law, registering your business and paying taxes are vital.
The business entity that you pick for your venture affects your payment of self-employment taxes. To ensure that you get it right, leave the vital task of filing your self-employment tax to a tax accountant based in Utah. Here are guidelines on how different business entities affect your self-employment tax.
If your business is a single-member LLC or sole proprietorship, self-employment taxes are imposed on your entire business earnings. The net profit of your company is first determined with Schedule C then used to compute your self-employment taxes on Schedule SE. The final calculated figure is then included on line 57 of your form 1040.
All the partners in an entity other than those in a limited partnership are deemed self-employed. The net returns of your organization are first reported on form 1065, and then each partner’s share of this income is recorded on schedule K-1. This share is then used to calculate the tax liability of each partner on Schedule SE, which is later filed on the individual’s form 1040.
In a corporation, your proceeds from dividends are not regarded as self-employment revenue. Even the compensation that you receive from the corporation isn’t subject to self-employment tax. All the income that you earn from a corporation is instead subject to FICA taxes calculated according to the prevailing employee rate.
You can now appreciate how navigating self-employment taxes is a complicated issue. Any mistake exposes your business to various federal penalties that will hurt your reputation. However, with a qualified tax accountant on your payroll, this shouldn’t be a cause of worry about your company.