Working for yourself cleaning houses can be very rewarding, both personally and financially. But when you are self employed, you can face a significantly higher tax burden than your traditionally employed peers. Understanding the implications of those taxes is essential, whether you are moving from a full-time job to a business career or just cleaning a few houses on the side.
Social Security Taxes
When you are self employed, either as a house cleaner or in another line of work, the Internal Revenue Service, IRS, considers you to be both the employer and the employee. What that means from a tax perspective is that you must pay both the employer and the employee side of the levy that funds the Social Security program. As of 2011, that means you must pay 4.2 percent of your income as an employee of your self-employed house cleaning business. In addition, you must pay another 6.2 percent as the employer share. The temporary 4.2 percent burden for employees is slated to return to 6.2 percent in 2012.
As a self-employed house cleaner and small business owner, you must also pay both the employer and the employee side of the Medicare tax. As of 2011, both the employer and the employee must pay 1.45 percent of their income in Medicare taxes. That means that the self-employed must pay the full 2.9 percent, which represents both the employer and the employer side of the tax
State and Local Taxes
As a self-employed business owner, you may also be required to pay state and local taxes on the money you make. Look at your last state tax return and see if it contains a section for business income or self-employment income. If so, you must pay taxes to the state revenue department on the money you make cleaning houses. The same is true of your local taxes if the return includes a section for reporting business income.
If you expect to owe more than $1,000 to the IRS, the tax agency may require that you make estimated quarterly tax payments instead of simply paying once a year like you are used to. If you believe you may be held to this requirement, you should check with a an accountant or tax planner to be sure. The tax planner or accountant can also help you determine how much you should pay to the IRS each quarter to avoid additional taxes and penalties.
Based in Pennsylvania, Bonnie Conrad has been working as a professional freelance writer since 2003. Her work can be seen on Credit Factor, Constant Content and a number of other websites. Conrad also works full-time as a computer technician and loves to write about a number of technician topics. She studied computer technology and business administration at Harrisburg Area Community College.