This handy book will guide through best practices to follow when calculating your freelance taxes.
As a self employed individual, you don’t have an employer to withhold taxes and make payments on your behalf, which means you need to pay Texas self employment tax. That amount is a total of 15.3%, with 12.4% of it dedicated to Social Security and 2.9% dedicated to Medicare.
Texas self employment tax is calculated based on your earnings. A base amount is established each year, against which the 12.4% of Social Security is applied. In 2020, the base amount will be the first $137,000 of your earnings. The second payment towards Medicare is 2.9% applied against all your combined net earnings. Then there may be variations if you have a married couples business, or your spouse is an employee.
To lower your tax bill, you could use a 1099 template or a tax software to track deductions.
There is an obligation to pay Texas self employment tax on a quarterly basis, with installments made on:
A worksheet on the tax form helps determine if you are required to file quarterly estimated tax payments.
Form 1040-ES, Estimated Tax for Individuals, is used to pay Texas self employment tax. To complete it, you will need your previous year’s return, or if you're in your first year of business, you’ll have to estimate your annual earnings.
