From the course: Running a Web Design Business: Defining Your Business Structure

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Understanding federal tax obligations

Understanding federal tax obligations

From the course: Running a Web Design Business: Defining Your Business Structure

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Understanding federal tax obligations

As discussed earlier, sole proprietors are considered self-employed, which comes with its own set of tax obligations. As of 2014, sole proprietors must pay a self-employment tax of 15.3% on all business profits of $400 or more. Sole proprietors can use Schedule SE, Form 1040, to calculate the tax due on their net earnings. You can also use one of the many online self-employment tax calculators to calculate this tax. Sole proprietors also need to determine the estimated tax they'll owe each quarter. You can use form 1040-ES, estimated tax for individuals, which has a worksheet and a table tax to help you figure out how much money you need to pay. You can pay your estimated taxes online, by mail or over the phone. Form 1040-ES also comes with four vouchers that you can use to pay by check or money order. I personally like to do everything online through the electronic federal tax payment system or EFTPS website. Here are the payment due dates. To avoid penalties, I highly recommend that…

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