Self-employed workers experience a wide range of freedom. However, with that freedom comes various tax obligations that a self-employed individual must handle. For example, self-employed workers are responsible for calculating the amount of their quarterly Social Security and Medicare taxes. Additionally, there are new tax regulations for 2019 that will alter self-employed workers operate. If you need assistance handling your tax obligations as a self-employed worker, you should consult with an experienced Roseville tax lawyer today. At the NewPoint Law Group, LLP, our legal team is prepared to work with you to develop a tax strategy that meets your unique needs. Our tax lawyers explain tax requirements for self-employed workers in 2019.
New Tax Laws for Self Employed Workers
The Tax Cuts and Jobs Act (TCJA) of 2017 made many sweeping changes that are beginning to take effect on self-employed workers and others. If you are a self-employed individual, you should be aware of the following changes to the tax law.
New Tax Brackets
Tax brackets and tax rates for all filers have been adjusted. Specifically, the tax brackets were widened, and more self-employed workers will likely be able to claim lower tax rates depending on their income.
Changes to Standard and Itemized Deductions
A standard deduction can be claimed for a fixed dollar amount if a tax filer does not wish to itemize their deductions. TCJA regulations succeeded in increasing the deduction amount. For example, the standard deduction amount for married joint filers before the TCJA was $13,000. Now that TCJA is in effect, the standard deduction amount for married joint filers is $24,000.
As mentioned, you can choose to use itemized deductions instead of a standard deduction. However, it is important to note that some itemized deductions will be different from previous years. For example, the limit on charitable deductions is now 60% of your gross income in comparison to the 50% from previous years. Another important change is that you can deduct state and local taxes only up to $10,000. Other changes to itemized deductions include moving expenses, casualty losses, and home mortgage interest.
It is also important to note that the alimony deduction has been eliminated. This means that you cannot use these court-ordered payments to a former spouse to deduct from your taxable income. Additionally, recipients of alimony payments cannot claim these payments as income.
Eliminated ACA Tax Penalty
As of 2019, taxpayers who do not have health insurance under the Affordable Care Act will not be taxed. This may allow you to save some money if you can afford to go uninsured.
These are only a few changes that self-employed workers should be aware of when filing their taxes. To learn more about TCJA changes, you should speak with an experienced California tax return planning lawyer.
An important part of being self-employed is keeping to a schedule of paying your self-employment taxes. While salaried employees will typically have these taxes removed from the paycheck automatically, a self-employed worker is responsible for calculating the amount of tax they owe each quarter.
Unfortunately, due to new regulations, self-employed individuals who earn a significant amount of money will likely have to pay higher taxes. The first tax that self-employed workers are responsible for is Social Security taxes. The Social Security tax rate is 12.4% of your income up to a certain amount. In 2019, that threshold is $132,900. While salaried employees split this tax with their employer, self-employed individuals are responsible for paying the 12.4% alone.
The other tax that a self-employed worker is responsible for is Medicare. The tax rate for Medicare is 2.9% of all your earnings. It is important to note that Medicare taxes do not have an income cap. You may also incur additional Medicare taxes if you are earning over a certain amount as a single or joint filer.
As mentioned, the self-employment tax is paid on a quarterly basis. California and the IRS have the same schedule for making self-employment tax payments:
- First Quarter Payments – April 18th
- Second Quarter Payments – June 15th
- Third Quarter Payments – September 15th
- Fourth Quarter Payments – January 15th of the next year
Failure to make timely payments could lead to penalties from the IRS and California. However, you may be eligible for a tax penalty abatement under certain circumstances.
Our California Tax Preparation Attorneys Can Help You File Self-Employment Taxes
If you are concerned about how new tax regulations may affect your business, you should contact an experienced Folsom tax preparation attorney today. The tax preparation attorneys at the NewPoint Law Group, LLP possess decades of experience helping residents of California manage their tax liabilities. We understand the complexities of federal and state taxes, and we are here to represent you. To schedule a confidential legal consultation to discuss your tax situation, call the NewPoint Law Group, LLP at 1 (800) 358-0305.