Tax obligations might differ for those who have a sole proprietorship to carry on their businesses, compared to the ordinary W-4 workers. First and foremost, an EIN must be obtained in order to progress in the tax procedures. The process to acquire an EIN is rather simple. There are two options available. The first way is through online application and the second one is delivering by a person. After printing out and filing the documents, they are needed to be sent to the Internal Revenue Service (“IRS”). Once the papers are submitted to the IRS, the application will be processed in due time.
In addition to having an EIN, there are also other duties and tax liabilities for the self-employed. Apart from paying the income tax, self-employed must pay the Self-Employment Fee. This fee includes the cost of social security and Medicare. First, net profit and a net loss of the business must be calculated. Income and expenses are relevant to this calculation. For instance, if the costs are less than the salary, the difference is net profit. When values are higher than income, the difference is a net loss. If there is net profit, it is subject to self-employment taxes.
If you have any further questions, please do not hesitate to contact us via [email protected]. You can also reach us at +1 (302) 803-9501. We are always glad to help you!