If you plan on starting a freelancing business, then you should expect several taxes that you will be obligated to pay. Without further ado, We
Federal taxes:
These taxes are a burden for any freelancer because:
- You are obliged to pay tax as the personal income tax from the business's profits.
- Showing your income and deduction from the previous year with tax paid along with it, you need to submit a file of annual income tax return with the IRS every 1 April of each year.
- You have to pay social security and medicare benefits while retiring.
When you hire employees:
- You have to pay federal payment tax
- You should withhold the social security and medicare taxes with income tax from their incomes.
- Have to pay taxes monthly to the IRS.
- Also, records to file quarterly and annual employment tax returns with the IRS.
State Taxes
States have their tax also, which you have to pay in the form of estimated tax during the year. They need to be paid at the same time as federal taxes.
When you hire employees:
- Withhold the tax from the paycheck of your employees.
- Provide employees with unemployment compensation by paying tax.
Local Taxes
Self-employed freelancers must pay local taxes by checking the government's website to see if they have to pay. Some areas have an annual charge, registration fee or business taxes.
