Hi – It’s Michelle! Sorry to hook you in with that title…you really DO have to pay your Self Employment tax for 2020…but you can delay paying some of it! You know you try to be disciplined, but sometimes you hold back on making your estimated quarterly payments. This year, in particular, it may have been more difficult to set money aside for those taxes. BUT, the CARES Act passed early in 2020 aimed to alleviate some of the difficulties faced by the self-employed sector and there certainly were some substantial benefits. For tax year 2020, the IRS is allowing self employed individuals to defer paying up to 50% of the SE tax that is owed.
What does that mean in plain English? Let’s look at an example.
- Let’s say that you calculated what you owe in Social Security tax, and it came out to $1,000.
- That simply means that you’d need to pay a minimum of $500 by December 31, 2021.
- The remaining amount would be due December 31, 2022.
While this sounds fantastic – I mean, who doesn’t want to put off paying taxes – there are some very important rules and dates that surround this tax deferral. During a time when changes seem to crop up with each new week, you may want to consider continuing to set that money aside — and potentially paying it as usual — while you still have it. That could help you to avoid a larger tax bill further down the line.
I am always available to answer questions – schedule a free consultation! My office is open and accepting new clients.