3 Tax Tips for Self-Employed Individuals
Being self-employed provides a freedom and flexibility that attracts entrepreneurs from all different types of businesses. On the flip side, one of the great challenges of being self-employed is dealing with your own tax reporting and payments. Not having an employer pay for half of your tax liability is a major detriment for a great deal of potential entrepreneurs who fear the large tax burden they will have to deal with. Read on for 3 key tax tips for self-employed individuals that will make tax paying easy and more affordable.
Tax Tip #1: Get On A Schedule
When you are self-employed you are responsible for reporting and paying taxes to the Government. On the federal level, you should make quarterly payments, check the IRS website for due dates and payment estimate tools– in general, you should put away 25-30% of your earnings. In addition to your federal taxes, you may need to make monthly sales tax payments to the state your business resides in. Check in with your local department of revenue to ensure you are covering your bases. Once you know your deadlines and estimates of payment amounts, register for online payment and link to a unique bank account that holds only your tax savings. This will make the process seamless and easy.
Tax Tip #2: Get Organized
It is recommended that small business owners invest in some kind of bookkeeping software to keep track of payments and receipts in case of an audit. Quickbooks is one of the more common programs, however there are many different systems to choose from. Overall it is essential that you record all of your income AND expenses. Be sure to save receipts for anything business related to back up your deduction come year end. This includes gas receipts, records of mileage traveled for work, materials purchased and any advertising costs used to promote your business.
Tax Tip#3: Get An Accountant On Your Team
While the 2 above tips are standard practice for filing taxes as a self-employed individual, the best thing you can do is find a good accountant. Not only will they be able to advise you on your payments and deductions, they can also help reduce your overall liability. Even if you are a business of 1, you will 100% need an accountant on your team to ensure your finances are kept in order, and to avoid paying penalties to the IRS or state.
Perhaps the most challenging part of being self-employed is the “unknown” when it comes to your finances. The above tips are essential in helping you to both understand and plan for your business. For more information on taxes for self-employed individuals, or to schedule a free consultation, contact Karen Stampone today at 215.277.1191.