If you are self employed, one of the hardest things to adjust to is paying your self employed income taxes. But can you receive a tax refund if you are self employed?
There’s a major difference in taxation between self employed individuals and those that are employed by other companies. When you are self employed, there is no employer to pay your Social Security and your Medicare taxes — Social Security and Medicare taxes are paid for by the employer. When you are self employed, you are your own employer and therefore, are required to pay 15.3% in self employed taxes.
This can make tax time extremely difficult for those who are self employed. So how can you get a tax refund as a self employed individual?
When you are self employed, your tax return is going to include a Schedule C. This is the worksheet that includes not only your business income and your gross sales, but also your deductions that are removed from your taxable income. If your business income was small enough and you had tax deductions in other areas, you may end up receiving a refund for that tax year.
If you have yet to file your 2021 taxes, there is a tax credit that you may be applicable for. Keep in mind that this is not a tax deduction, but rather a tax credit, which will be paid in the form of a refund. To see if you qualify, you can click the link here.
Another way you may qualify to receive a tax refund if you are self employed is if you overpaid your estimated quarterly income taxes. If you are self employed and you anticipate that you will owe a tax balance of at least $1,000, the IRS requires you to file quarterly estimated income taxes.
The IRS requires you estimate the amount of tax that you will owe next year, divide it out into four different payments, and pay each of the estimated balances quarterly. However, because this is an estimation, some people may overestimate and overpay their estimated taxes. Any overpayment of estimated taxes will be refunded to you in the form of a tax refund.
Want to learn more about receiving a tax refund while self employed? Watch the video here!
