Being self-employed in Mississippi comes with its own set of tax responsibilities. Navigating these can be challenging, but understanding the basics can make the process smoother. Whether you're a freelancer, contractor, or small business owner, knowing how to handle your taxes is crucial to maintaining your financial health and staying compliant with state and federal regulations.
Self-employed taxes refer to the taxes that individuals must pay when they work for themselves. Unlike traditional employees, self-employed individuals don't have taxes withheld from their paychecks. Instead, they are responsible for calculating and paying their taxes directly to the government. This includes both income tax and self-employment tax, which covers Social Security and Medicare.
In Mississippi, self-employed individuals must pay both federal and state taxes. The federal self-employment tax rate is currently 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. Additionally, self-employed individuals must pay Mississippi state income tax, which varies based on income levels.
Understanding these tax obligations is essential for self-employed individuals to avoid penalties and interest charges. Proper planning and record-keeping can help manage these responsibilities effectively.
The first step in calculating your self-employment tax is determining your net income. This is the total income you earn from your business activities minus any allowable business expenses. Keeping accurate records of your income and expenses is crucial for this process. Use accounting software or hire a professional accountant to ensure accuracy.
Once you have your net income, you can calculate your self-employment tax. The tax rate is 15.3% on the first $142,800 of net income for Social Security and Medicare. If your net income exceeds this amount, only the Medicare portion (2.9%) applies to the excess. Remember, you can deduct half of your self-employment tax when calculating your adjusted gross income on your federal tax return.
In addition to federal taxes, you must also pay Mississippi state income tax. The state tax rate ranges from 0% to 5%, depending on your income level. Use the Mississippi Department of Revenue's tax tables to estimate your state tax liability. It's important to make quarterly estimated tax payments to avoid underpayment penalties.
Self-employed individuals are required to make quarterly estimated tax payments to both the IRS and the Mississippi Department of Revenue. These payments help cover your income and self-employment taxes throughout the year. The due dates for these payments are typically April 15, June 15, September 15, and January 15 of the following year.
At the end of the year, you'll need to file an annual tax return. For federal taxes, this involves completing Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax) along with your Form 1040. For Mississippi state taxes, you'll file Form 80-105 or Form 80-205, depending on your residency status.
Maintaining accurate records is vital for filing your taxes correctly. Keep track of all income, expenses, and tax payments throughout the year. This will not only help you file your taxes accurately but also provide documentation in case of an audit. Consider using accounting software or hiring a professional accountant to assist with record-keeping.
As a self-employed individual, you can deduct various business expenses to reduce your taxable income. Common deductions include office supplies, travel expenses, and advertising costs. Ensure that these expenses are ordinary and necessary for your business operations. Keep all receipts and documentation to support your deductions.
If you work from home, you may qualify for a home office deduction. This allows you to deduct a portion of your home expenses, such as rent or mortgage interest, utilities, and insurance. To qualify, your home office must be used regularly and exclusively for business purposes. The IRS provides a simplified option for calculating this deduction based on square footage.
Business mileage is one of the most valuable and commonly used deductions for self-employed individuals and independent contractors. The IRS allows you to deduct the miles you drive for work-related purposes, including client meetings, job sites, and business errands.
For 2025, the IRS reimbursement rate is worth 70 cents in deductions, adding up quickly to significant tax savings. Whether you’re delivering for a gig platform, running a small business, or freelancing, keeping accurate mileage records is key to claiming this deduction. The IRS requires detailed logs of your trips, including dates, destinations, and purposes. Tracking your miles not only helps you reduce your taxable income but also ensures you stay compliant with IRS rules and avoid audit risks. With tools like Everlance, you can automate your mileage tracking and generate IRS-compliant reports, taking the guesswork out of this essential tax deduction.
Organization is key to managing self-employed taxes effectively. Keep detailed records of all income and expenses, and store important documents in a safe place. Consider using digital tools to track your finances and automate some of the processes. Staying organized will make tax time less stressful and help you avoid costly mistakes.
Planning for tax payments is crucial for self-employed individuals. Set aside a portion of your income throughout the year to cover your tax liabilities. Consider opening a separate savings account for this purpose. By planning ahead, you can avoid financial strain and ensure that you have the funds available when tax payments are due.
Understanding and managing self-employed taxes in Mississippi is essential for anyone working for themselves. By staying informed about your tax obligations, keeping accurate records, and seeking professional advice when needed, you can navigate the complexities of self-employment taxes with confidence. Remember, proper planning and organization are key to maintaining your financial health and avoiding unnecessary penalties.
Everlance tracks your business miles and expenses automatically in the background, from your phone.
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Brad Thibeau is the Head of Growth & Partnerships at Everlance. Brad has worked at Everlance since 2021 with a focus on helping self employed people save time and money on their taxes.
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