Tips for Making Self Employment Less Taxing
As more people open their own businesses, freelance, and use gig work for income, here are tips for making self employment less taxing. A growing number of people are voting with their skills and leaving the world of traditional employment behind. These are folks who are opening small businesses, embracing freelancing, and using gig work to make a great income.
As this trend continues, many newly self-employed individuals are finding themselves at a loss, especially when tax season rolls around. Getting blindsided by a huge tax bill after working so hard all year is one of the worst feelings in the world.
Traditional employees can rely on their employers to withhold taxes and report their earnings to the IRS, but self-employed individuals must do these things themselves. To make matters worse, the self-employed often pay higher taxes than their traditionally employed counterparts, leaving them short of the cash they need when tax deadlines roll around. If you get blindsided by a tax bill of more than $10k to the IRS or state but can’t pay in full, call 1.888.4TAXREZ or use our contact form. We help people find tax relief.
Here are a few tips for making self-employment less taxing:
Set up a business bank account
The self-employed need to keep their personal and business activities separate, and the best way to do that is with a business bank account. A basic business checking or savings account will make it easier to track your income and expenses, making tax season easier and less costly.
Open a business credit card account
Having a separate credit card in the name of your business will give you an easy way to pay expenses applicable to your self-employment income. This can make expense tracking, reporting, and tax filing a lot easier.
Avoid underpayment penalties by making quarterly payments
When you work a traditional job your employer is responsible for accurate tax withholding, but the self-employed are not so lucky. As a self-employed individual you are responsible for paying your taxes on a timely basis, and failing to do so could trigger costly penalties and interest. Making quarterly payments to the IRS and state is the best way to avoid those expensive repercussions.
Track expenses throughout the year, not just at tax time
If you wait until the tax deadline to add up your expenses, you could miss deductions that would have otherwise reduced the amount you owe. It is important to keep track of expenses when they are incurred to prevent this underreporting.
Research retirement plans for the self-employed
The self-employed have access to some exceptionally generous retirement plans, including solo 401(k) plans and SEP-IRAs. These accounts can sharply reduce the amount of taxes you pay, so do your homework and choose the one that is right for you.
Have your taxes reviewed by a qualified tax professional
When your taxes are simple, doing them yourself is pretty easy. When you’re self-employed, tax software makes filing taxes easy, but that simplicity could cost you. Even if you are confident in your abilities, it never hurts to have your work reviewed by a CPA or enrolled agent. This can save you a lot of money.
There is a lot to love about self-employment, from the chance to work at home to the opportunity to live life on your terms. There is no doubt that being self-employed can be a taxing experience. This is why it is important to plan carefully from the start. The tips listed above can help you reduce your taxes, allowing you to keep more of the money you’ve worked hard for.
Do you owe back taxes?
Many taxpayers fall behind on their taxes for years on end after getting blindsided by a big tax bill every year. It’s okay if that’s you, we are here to help you stop worrying and start living.
There is a solution to every IRS problem!
If you need an expert tax resolution provider who knows how to navigate the IRS maze, call us today at 1.888.4TAXREZ or use our contact form, and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
