Self-Employed Tax Obligations
Tax procedure is different from a standard W-4 worker if you do have a sole proprietorship to carry on your business. Obtaining an EIN is a must in order to make tax operations.
How to get an EIN?
The process to acquire an EIN is simple. There are two ways to get one. The first way is through online application and the second one is delivering by hand. After printing out the documents, it is needed to be sent to the IRS. Once the papers are submitted to the IRS, it means that an application has been already made.
Since you are the only one and self-employed, your tax duties and responsibilities are much more than what the standard employee has. In addition to personal income taxes, the Self-Employment (SE) fee must be paid. SE does include the cost of social security and Medicare.
People who are self-employed are not responsible for paying taxes. First, it is needed to calculate net profit and net loss from business. Income and expenses are the subjects of this calculation here. If the costs are less than salary, the difference is net profit. If the values are higher than income, the difference is a net loss. If there is net profit, it is subject to self-employment taxes.
On the other hand, if you do have a church organization, you don’t have to pay at all.