More and more people are moving towards self employment as their income choice. Working for self means setting your own hours, choosing your own job, and working in the uniform of home office choice (for many its pajamas). It even seems that the money is much better once you start working for yourself.
Sometimes the money is better. More often than not you are just missing an important financial feature ” TAXES ” and the government always gets its man (or dollar). Self employment taxes are 15.3 percent of anything that you make over $400 in one year up to $102,000 and after that the rate increases. This covers the full payment of Social Security and Medicare (which use to be divided between you and your employer but now you ARE the employer).
There are some exemptions to the self employment tax, and the tax is based on your net income instead of your gross. But it can still become an expensive mistake if you don’t remember to set it aside for tax season.
Setting up a separate savings account for self employment expenses is one way to guarantee that the funds will be there when the government sends you their bill.