In addition to the previously discussed deductions available to the self-employed, there are at least two other considerations regarding timing and quarterly payments that the self-employed individual should consider.
If your wages or self-employment income varies significantly from year to year or you are close to the threshold for triggering the additional Medicare tax, income timing strategies may help you avoid or minimize it.
For example, as a self-employed taxpayer, you may have flexibility on when you pay expenses or invoice customers (see previous blog: Timing Your Business Income and Expenses). If your self-employment income is from a part-time activity and you are also an employee elsewhere, perhaps you can time with your employer when you receive a bonus.
Finally, if you are an employee, your employer will withhold your income taxes and your half of the employment taxes from your gross wages and together with their half of the employment taxes, remit the total to the government. If you are self-employed, you are required to make quarterly estimated payments to the government to cover both your income taxes and your self-employment taxes.
For more information on the benefits and burdens of the self-employed, please contact me at HZemel@BerdonLLP.com or your Berdon advisor.
Hal Zemel, a Tax Principal at Berdon LLP, New York Accountants, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.