Neil &  Company CPAs, PC

A Professional Corporation

1184 North 15th Street, Bozeman, MT 59715


Phone: 406-587-9239


June 2022

Taxes for the Newly Self-Employed

Taxes for the Newly Self-Employed

Before you take your first step into the world of entrepreneurship, there's a checklist of things you'll need to do to avoid tax problems while you're starting.

Depending on how your business is structured and whether or not you have employees, you may need a federal employer identification number. This unique nine-digit number works like a Social Security number for your company.

Businesses with employees need one. Sole proprietorships generally don’t need one, but other corporate structures with more than one owner need one too. It’s free, and you can apply online with the IRS.

Most self-employed taxpayers will need to make quarterly estimated tax payments. This might be a new concept for anyone that’s had a W-2 job where tax was withheld from your paycheck.

Being self-employed means that you’re responsible for paying quarterly tax payments. You must pay tax as you earn income, not at the end of the year in a lump payment. Doing that may cause you to incur penalties for failing to pay on time.

Your tax professional can help calculate how much you need to pay each quarter and help ensure that you don’t have a big tax bill next April because you grossly underpayed.

If you’ve always been an employee, you might not be aware of the self-employment tax. This is a 15.3% tax most entrepreneurs pay on their company’s earnings. It represents the employer and employee portion of Social Security and Medicare taxes. However, you’ll receive a tax credit of 7.65% for the employer’s share when you file your annual tax return.

There are ways to avoid paying self-employment tax on all of your business profits. One option is to have your company taxed as an S-Corp. But be careful, because S-Corps come with other administrative and legal requirements. It’s best to speak with your tax professional to determine what business structure makes sense for you and your business.


Enter your Name and Email address to get
the newsletter delivered to your inbox.

Please include name of person that directed you to my online newsletter so I can thank them personally.


Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.

The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.