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Taxes For the Self-Employed | How to file the PERFECT Income Tax Return



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hey what's up everybody welcome back to

the mind-blowing video series of tips

tricks strategies and hacks for your

income taxes my name is tyrone gregory

the people preneur and founder of the

axe' from square one comm website and i

am going to be your guide through the

fourth video in this series and this

video series is dedicated all to the

self-employed and the reason they have

their own video is because Norda for

this group of individuals to achieve

that perfect tax return there are a few

extra steps that they must consider if

not they're going to be caught off guard

but before we get into the details let

me explain the exactly who are the

self-employed well they are a group of

individuals who are considered to be

independent contractors because they

don't necessarily have one employer or

in boss they work for themselves they

are independent they perform various

tasks perform various projects and once

those things are completed they get paid

and with the introduction of the

internet and social media we also have a

new group of independent contractors

that we like to call social media

preneur and I love these guys because

they're doing a great thing online

generating what we call passive income

but for purposes of this video there are

two types that I want to identify and

speak to the two types of the

self-employed and they are those who are

suffering ployed on purpose and those

who are self-employed by accident but

let me explain those who are

self-employed on purpose those guys are

the serial entrepreneurs they they know

exactly what it is they're doing they

made a choice they said I don't want to

have a boss I'm gonna go out here and I

am going to be in charge of everything

that I do they are operating without a

safety net

they're innovators they're doing

everything on their own they are the

leaders they are the matter they

our self that is only them and they are

doing this on purpose it is a choice

versus those who are by accident meaning

that they have no clue that they are

self-employed they just receive a 1099

miscellaneous at the end of the year

which also means that they are not

prepared for what it means to be

self-employed for tax purposes and

you'll know if you by accident if you're

going to a job daily getting paid but

not receiving a paycheck stub or same

scenario going to a job daily but you're

not having any taxes withheld that's

where you're self-employed by accident

but in either case whether you're

self-employed on purpose or by accident

this video is going to help you file

that perfect tax return but first things

first just like as a regular employee

you're going to have to determine your

taxable income and get to you taxes and

everything that we've discussed so far

however for the self-employed is

slightly different because it's not the

gross income that you're going to start

with this year net and here's the

formula for determining your net income

as a self-employed individual you're

going to take your gross income minus

your expenses and then you arrive at

your net income and that is the starting

point for determining your taxable

income and for gross income purposes a

lot of times self-employed individuals

will receive this for the 1099

miscellaneous this is probably one of

the biggest identifiers for those who

are self-employed but note that not all

the time a self-employed will you

receive a 1099 because not everybody

reports the income that they pay you but

this is one of the biggest indicators

and more importantly if income is

reported in by seven of this 1099 notice

it says

employee compensation right so that is

what determines whether you consider it

self-employed or not and by the way if

you feel that you receive this form by

accident meaning that you feel you

should have received that w-2 as opposed

to a 1099 miscellaneous I highly suggest

that you go speak to your tax

professional or shoot me an email

because there there are some things that

you may need to do but anyway this is

what is going to be reported for as far

as gross income but now let's talk about

your expenses you know there's a an old

saying that says it takes money to make

money and as a entrepreneur as a serial

entrepreneur a self-employed individual

you know that all too well to be true

right as the independent contractor you

are going to spin some money to make

some money and the money that is spent

has to be taken into account let me give

you an example let's say as a

self-employed individual you earn

seventy five thousand dollars for that

tax here and in order to earn a

seventy-five thousand you spent twenty

five thousand I could have been

communication supplies rent whatever so

once you deduct the 25 from the

seventy-five that you spent your net

income is fifty thousand and that's what

you're going to use to determine what's

taxable that's the starting point right

now you can start from the same place as

a regular w-2 employee so expenses when

it comes to the self-employed I had a

Slava what expenses can you deduct and

if you are self-employed and you're not

quite sure what expenses you can deduct

I highly suggest that you go to the IRS

gov and download yourself a copy of a

Schedule C now here's a Schedule C just

part two only and this is the part that

has all of the expenses that are

self-employed individuals

are loud you can see advertising car and

truck expenses depreciation insurance

mortgage over here your office expenses

if you rent vehicles or you know repair

supplies every type of expense

that's deductible for the self-employed

is here now if you need to know what

expenses fall in what categories that's

where like I said I will go talk to your

your tax professional shoot me an email

or something maybe I can see you know

about about helping you out but just to

get a general idea download a copy of

the Schedule C and you will know exactly

what expenses that you could go to okay

all right so now we've arrived at your

taxable income everything else from here

on out is the same with the exception of

that the self-employed has to worry

about an additional tax called the

self-employment tax and you may be

asking well what is it the

self-employment tax is a tax that's

fifteen point three percent of any

self-employment income over four hundred

dollars and this tax is not added to any

other income except self-employment

meaning that if you are a w-2 employee

and self-employed this will not be added

to anything except for the amount that

is earned under self-employment let's

break down that 15.3%

it is Social Security tax of twelve

point four percent and Medicare tax of

two point nine it's the same exact as a

w-2 employee that's why I don't like to

call the self-employment tax and

additional tax because it's not

additional it's the same exact as if you

were a w-2 employee and let's look at

this example remember from ability in

the first video we looked at this pay

stub and net was current earnings of

nineteen twenty here and then there we

went over to the the tax is what we

looked at the

Oh taxes but now we'll see here the

federal which is the meed is the

Medicare tax and then the federal Social

Security I know it says oasdi which is

for old a survivor

disability is sorted but that's just a

long word for Social Security so you'll

see even as a w-2 employee they also pay

that tax now I know some of you were

jumping ahead and doing the math to see

if that amount is fifteen point three

percent of the nineteen twenty and I'm

just going to tell you right now it

isn't as a w-2 employee

we're only responsible for half of those

taxes whereas as self-employed you're

responsible for the full amount but

don't worry don't say it's not fair

because even as a self-employed

individual you still get credit for a

half okay and to figure out the

self-employment tax and you can start to

go to that that process of receiving the

perfect return is figured only form

scheduled se again this can be found on

irs.gov this type and schedule SC and

you will see this form here of course

this is just a snapshot of the sexes I

think it's about a two-page form but

this is for ninety percent of the people

who are self-employed we'll focus on

this form here and as you can see it's a

very simple form only six six lines

there and as a matter of fact you're

only going to use probably about five

lines unless you're old McDonald and you

have a farm lines one A and one B don't

necessarily apply to you you start here

in line two

and you go through and just read the

lines do the math very simple but

remember I said you get a credit for

half as you can see here on line six is

going to be a deduction for one half as

you were multiplied by five and enter it

in as an adjustment so everything pretty

much about in the south but let's take a

look at the tip forty real quick so this

is our starting point once you've

determined your net amount you're going

put in here on line 12 where it says

your business income then remember we

just figure out the deductable part of

the social security so I self-employment

tax that's going to go here on line 27

and then here we are line 43 you're

still going to go through the same steps

as before survive into taxable income

the only difference is once you have

figured out your tax you're now going to

have to figure out your self-employment

tax so now now now now now that you've

done all that you get to pick a method

pick the method that you're going to use

to determine your tax liability either

the brackets or then look it up the only

exception to this for the self-employed

is the fact that once you've chosen the

method there's no w-4 for the

self-employed to fill out they can only

do quarterly estimated payments only

they don't fill out a w-4 because there

is no employer withholding anything and

remember the formula for the query

estimated payments is you determine your

tax liability divided by four which is

going to give you the number of payments

so of course the example let's go to an

example so here is Bryan Bryan is single

his net meaning that we've already

figured out expenses and everything was

seventy-five thousand and of course his

pay frequency is going to be those based

on the quarterly estimated payments and

Bryan still had the same goal to filed

that perfect tax return especially as a

self-employed he does not want to pay

more than he should he wants to pay only

what he needs to pay and be done so

going through the motions we've

determined that his tax liability is ten

thousand six hundred and fifty but

remember we're gonna have to add his

self-employment tax which we've

determined was ten thousand five ninety

seven so with those two being added to

get

he has a total tax liability of twenty

one thousand two hundred and forty seven

dollars okay so because his quarterly

has the payment is four times a year so

this becomes the formula we're going to

take that twenty one thousand two forty

seven divided by four which is going to

give us his payments remember four equal

payments so the first one as five

thousand three hundred $11.75 to be made

on April fifteenth that's the first

payment the second one the same amount

doom on June 15 third one same amount

due on September fifteenth and his final

payment the same amount to a January

15th of the following year as you can

see very simple just a few extra steps

only for the self-employed and so here

we are the conclusion and there it is

for my self-employed folks same as a w-2

with the exception of those two extra

steps determining your gross income

I'm sorry determining your net income

then determine your taxable income

figure out your self-employment tax

add those two individuals together and

then you have your total tax liability

and now you start to method so of course

homework you know I love giving you

homework trust me I know

as I'm the preneur there's already a lot

on your plate especially if you don't

have a team in place I know that you are

the manager I know you're the sales rep

I know that you are the customer service

I know that you are the marketing and

now yes I'm asking you to be the

accountant and the reason that is

because so many businesses fail within

the first couple of years of operation

and 90% of their failure is a result

especially r44 look poor financial

planning therefore I want you to be a

hundred percent ready for your finances

so

this is your homework play around with

the numbers as always try to figure out

an estimate as much as you can as to

what you think your income is going to

be and go ahead and start figuring out

how much you need to pay and get those

quarterly estimated payments in and of

always if you need me you can find me on

social media shoot me an email send me a

tweet leave a message on Facebook leave

a message in the comments below or find

me somehow some way I don't know and

yeah make sure you continue to subscribe

to the channel and we'll go from it have

a good