If you are a freelancer or a business owner and earn income from various sources, you are required to pay your social security, medicare and personal income taxes (just like someone who works for an employer and receives a weekly, biweekly, or monthly paycheck).
When you are self-employed, your employer is not submitting taxes on your behalf (as when taxes are withheld from an employee’s paycheck).
Therefore, you the freelancer or business owner is responsible for submitting these taxes to the IRS and/or State of Residence.
When an employee works for an employer, the employer pays 50% of social security and medicare taxes and the other 50% is withheld from your paycheck. In addition, the employer withholds personal tax from your check according to the W-4 you submitted upon hire.
However, when you are self-employed, you are both the employer and employee and are responsible for 100% of social security and medicare taxes (15.3% of gross wages) in addition to submitting personal income tax.
The IRS expects these taxes to be paid timely, which means 4 times per year. For the 2018 tax year these payments are due:
1st payment: 4/17/18
2nd payment: 6/15/18
3rd payment: 9/17/18
4th payment: 1/15/19
If you have questions about how much your estimated payments should be, please feel free to schedule a 15-minute complimentary consultation.