As a sole proprietor, you are in charge of everything about your business. You handle your own bookkeeping, monitor income and loss on a monthly basis, and withhold taxes each quarter. However, even seasoned sole proprietors don’t always know what their tax liability is or which bracket they fall into. Linda M. Shiraiwa CPA, PS, in Gig Harbor, WA, wants to help you better understand your taxes. She explains what sole proprietors and self-employed individuals need to know.

You’re Responsible for the Full Amount

When you’re an employee, your employer withholds a certain amount of money from each paycheck for your taxes. This way, the federal government receives at least a portion of your taxes on your earned wages throughout the year. However, when you’re self-employed, you’re responsible for paying the full amount. Your amount will differ based on the total taxable income you earned throughout the year.

Tax Brackets Determine How Much You Owe

Tax brackets determine the percentage of your income you owe the government at the end of the year. Depending on your total taxable income, your bracket may be as low as 10% or as high as 35% for a portion of your earnings. The more money you make, the higher your tax liability will be. If you’re looking for a way to save money on taxes, practice strong bookkeeping. Track your expenses, itemize receipts, and work with an experienced CPA to help you save wherever possible.

Self-Employment Tax Is Real

It may seem odd that the government would assess a specific tax on self-employed individuals, but it’s something you’d already pay on someone else’s payroll. The self-employment tax is your contribution to Social Security and Medicare. For most individuals, this amount is about 15.3% of their income. This is in addition to the amount owed for your tax bracket.

The easiest way to simplify your tax return is to work with an experienced bookkeeping specialist and let them handle your personal and business accounting needs. If you’re looking for a trusted CPA to help you streamline your tax return, contact Linda M. Shiraiwa CPA, PS. Her dedicated staff will help you with everything from recordkeeping to tax preparation so you can focus on running your business. Learn more online, and call (253) 858-6030 to schedule a consultation.