Taxes & Returns

As a freelancer, you have to pay self-employment tax (15.3% for Social Security/Medicare on profits over $400) plus income tax. If your total tax is $1,000 or more, pay estimated taxes quarterly to the IRS using Form 1040-ES, either online or by mail, to avoid penalties.

HSAs give you a triple tax benefit; they let you save for medical costs with pre-tax money. Your medical bill contributions and withdrawals are tax-free, lowering your taxable income.

Small businesses are mandated to withhold federal income, Social Security, and Medicare taxes from employee pay. Use IRS Publication 15 for guidance.

File Form 941 every 3 months and Form 940 once a year. Failure to comply can lead to fines and interest charges, such as those incurred for late Form 941 filings.

The type of federal tax form you need to file will depend on your business structure.

For Sole Proprietorship, File Schedule C (Form 1040). For partnerships and companies, they must use particular forms, such as the Schedule K-1 and corporate tax return (Form 1120).

In your case, I believe you are the owner, so proceed to file Schedule C (Form 1040).

When hiring W-2 workers, you must manage their payroll taxes, including Social Security, income, and Medicare contributions, and provide additional benefits such as unemployment insurance and health insurance.

However, 1099 contractors bear the responsibility for their own taxes and receive fewer benefits. W-2 workers have more control over their work, despite contractors offering more flexibility and fewer administrative tasks.

If your company wants greater control, then choose W-2; if your company needs more flexibility, then 1099 may be better.