Self-employment tax

Self-employment tax is the first tax you should pay as a self-employed.

This is the tax levied on sole proprietors or independent contractors involved in any business, whether full-time or part-time. It’s a Social Security and Medicare tax for people who work for themselves.

For employed citizens, this tax is often withheld from their monthly salaries and is quite different from income tax. First figure out your net profits or losses. You can figure it out by subtracting your net expenses from your net income.

Once you know whether your profits or losses, you can use this information to fill the tax return forms 1040 or 1040-SR accordingly.

As a citizen, you’ll also need to pay income tax, which is often imposed on all income-earning citizens by the federal government.

Income tax is payable regardless of whether you are corporate employed or self-employed. Your tax amount depends on the federal tax rate and may increase as your income increases. The percentage of income tax will also vary with your income tax bracket, which still depends on the amount of money you make.