This handy book will guide through best practices to follow when calculating your freelance taxes.
Those who are self employed need to look after some tax obligations that were once handled by their employers. One is the Massachusetts self employment tax, which provides 12.4% to Social Security (social security, old-age, survivors, and disability insurance) and 2.9% to Medicare (hospital insurance), for a total of 15.3%.
There are two calculations that make up the amount owed in Massachusetts self employment tax. The 12.4% to Social Security is applied to a certain amount of your earnings, which in 2020 has been set at the first $137,000 of your earnings. The 2.9% to Medicare is applied to your combined net earnings. There are differences if you have a married couples business or your spouse works for you.
The obligation to pay Massachusetts self employment tax includes quarterly installments, and you could face an estimated tax penalty if you don’t make the quarterly tax payments on:
You could also receive an underpayment penalty if you pay less money than you owe.
The Massachusetts self employment tax is paid quarterly using Form 1040-ES, Estimated Tax for Individuals. Then file your annual tax return using Schedule SE (Form 1040 or 1040-SR ), Self-Employment Tax to report your Social Security and Medicare taxes.
