Can Smartphone Apps Make Self-Employment Taxes Easy?

Feb 24, 2012
KC Morgan

Tax apps and self-employment don't always mix. - Business - bury-osiol

There's an app for just about everything these days, but does that mean professionals should rely on one to complete their self-employment taxes?

When the tax code is so complex that even financial wizards and career politicians have trouble getting a firm grasp on it, is it possible that an iPhone app can figure it all out? New mobile tax apps are springing up for popular electronic devices, but is it safe to trust something as important as self-employment taxes to a smartphone…even if it is the coolest model available?

Tax Apps

USA Today recently investigated some of the mobile apps that offer tax help, reviewing the features and functionality. TurboTax and H&R Block both offer mobile apps that allow individuals to file their taxes online. Third-party apps, like TaxAct, are also available. Since everyone and everything is on the go these days, it only makes sense that taxes should be condensed...or does it?

Here’s the rub: tax apps are every bit as confusing as filling out the tax forms by hand. Mobile app users enjoy the functionality of using an electronic touch screen instead of a pencil, but it’s still necessary to understand how to fill out tax forms. The math is perhaps a little easier with built-in calculation functions, but the tax code is still pretty tricky -- especially for the self-employed.

Self-Employment Taxes

Filing self-employment taxes isn’t like filing regular income taxes. The self-employed don’t receive W-2 forms that make everything easy, because taxes are not taken out of self-employment income throughout the year. Earnings must be recorded and tallied up by the self-employed professional, and the amount of taxes owed must be figured out and paid. Many self-employed professionals pay these taxes yearly, but it’s also possible to make payments monthly or quarterly.

Self-employed professionals must claim and pay income taxes, but they must also file and pay their self-employment taxes. These are separate taxes that aren’t a part of the income taxes everyone must pay. Self-employment taxes go, in part, toward Social Security. Traditional employers pay a portion of social security taxes, which is why a self-employed professional and a traditionally employed professional who earn the same amount money in a calendar year won’t end up with the same amount of money after tax time.

Only someone experienced in filing their own self-employment taxes should attempt to start using an app to do so. Apps simplify the process, but they don’t teach it. Don’t trust something as important as taxes to an app unless there’s already a wellspring of experience in place from which to draw.