Being self-employed is a fantastic way to live. You get to be your own boss, create your own schedule, and do things your way. However, things can get muddied up a bit when it comes time to do your taxes.
Do you know the self-employment tax rates, write-offs, and other policies?
We’re guessing: probably not.
The tax laws of America are quite in-depth and complex. Accountants and tax attorneys go to school for years to specialize in what they do, so don’t expect to read a single article and become a pro!
However, knowing some self-employment tax tips can be incredibly helpful. Follow along for more information!
1. Learn What You Can Deduct
When you are self-employed and own your own business, there are a lot of deductions and tax credits that are available to you. These vary greatly depending on your business and what you do.
For example, if you use your car for business-related purposes, you need to keep a mileage log in your car and track every mile you drive for business reasons. These deductions also include supplies, insurance, and all other costs that tie into your business.
2. Keep Your Personal and Business Expenses Separate
Another important self-employment tax tip is learning how to keep all of your personal and business finances separate. You should get a separate business account at your bank. This will keep things clean and simple when it comes time to file taxes since you file separately for personal and business.
If you are in the middle of the year, it’s still a good idea to make this correction as soon as possible. The sooner you get things separated, the better.
3. Estimate Quarterly Payments
Next, as a self-employed member of society, your taxes won’t come out automatically, as they would if you were being paid through an employer. You need to make quarterly payments in April, June, September, and January.
Use the previous year’s taxes as an estimate of how much you should pay. Failing to pay enough could leave you with a nasty surprise.
4. Stay Organized
One of the most important self-employed tax tips is learning how to stay organized. You need to keep every single aspect of your finances cataloged.
This means keeping all physical and digital receipts and keeping a spreadsheet of all of your expenses and costs. This spreadsheet needs to be updated weekly to avoid a giant headache down the road.
An appropriate spreadsheet should:
- Include all business costs and expenditures
- Include all revenue
- Have a separate tab for each month
- Have automated calculations
Being organized cannot be understated and is one of the most important tips for filing taxes to keep you from running into any problems with the IRS!
5. Learn When to Ask for Help
People who are self-employed get used to doing things on their own and only relying on themselves. However, as far as self-employment tax tips are concerned, you need to break free from that mentality.
Taxes are complicated, especially for your business. Reach out for help and hire a certified tax specialist. Not only will you avoid fees and penalties by making errors, but a tax specialist can also save you tons of money.
Use These Self-Employment Tax Tips to Save Money
We hope this article on self-employment tax tips helps you prepare for this tax season. Remember, it’s never too early or too late to start! The more organized and prepared you are, the less of a headache it’ll be!
Before you go, take a moment to look over some of our other articles about finances and business. You’ll probably find more useful information!