Self-employment taxįICA consists of your federal Social Security tax (12.4%) and Medicare tax (2.9%), for a total self-employment tax rate of 15.3% of your net business income. Self-employed individuals need to pay self-employment tax (which is 15.3% of your net business income) as well as state and federal income tax. So if you understand how your entity type works, you’ll know how your taxes work. As long as you’re self-employed, the IRS only looks at you through the lens of your business entity. Note: taxes work the exact same way for independent contractors and freelancers. Your employer also files a Form W-2 (Wage and Tax Statement) for you. If you run your business part time, and you’re also someone’s employee, you’ll need to file your own business taxes with Form 1040 (US Individual Income Tax Return). Setting one up is quick and easy: if you don’t formally register as a certain type of business entity, the IRS will treat you as a sole proprietor by default. In the USA, approximately 73% of businesses are registered as sole proprietorships-clearly the most popular business structure for entrepreneurs going it on their own. With any of these business structures, your earnings are reported as part of your personal income for tax purposes. Most independent contractors are technically small business owners that operate either as a sole proprietorship, limited liability company (LLC), partnership, or S corporation. The postal address for your state can be found on the IRS website here (link is external).First, make sure you understand your business structure
1040EZ if your taxable income is below $100,000 your filing status is single or married filing jointly you are not claiming any dependents and your interest income is $1,500 or less.IRS e-file (link is external) can choose the best form for your situation. Any forms showing interest, tax credits and/or dividends paid to youĬlick here (link is external) for a comprehensive list.W-2s, showing annual wages from your employers.Social Security numbers for yourself, your spouse and dependents (if applicable).Your Adjusted Gross Income (from your last year’s tax return or the IRS Get Transcript Online (link is external) tool).Step 1: Gather all relevant documents and information. You can file your taxes online or by mail. Get in touch with us today for some reliable advice on tax in the US! You will be paying taxes in the US but without the overhead of directly dealing with the US tax authorities. Our advice is 100 percent free, and comes with no obligations. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their US work permit. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. If you have any questions about tax in the US, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We work with numerous umbrella companies in the US, many of whom are experts in tax and immigration laws. They can deal with any issues with the US tax office or tax department directly including processing your tax refund if you are eligible.
The companies are experts in taxation in the US, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. The only difference is that you submit your timesheets to them they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records). An umbrella company in the US can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. Using an Umbrella Company for Income Tax :Ĭontractors in the US are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option.