Best Tips for the Self-Employed
You haven’t had to deal about tax computations and paying them while you were still employed. Now that you work for yourself, you will have to do these on your own.
Are you looking for tips to help you deal with these new issues you are facing? Our guide can give you some ideas.
Self-employed people face unique challenges with regards to paying taxes. Here are some tips to take advantage of tax benefits for the self-employed, lessen cost, and make the reality of self-employment manageable:
- Learn what deductions you can avail of to lessen your tax burden.
One deduction that you can tap is the home office deduction. It is an amount attributed for your use of a part of your home primarily, exclusively and regularly to conduct business and for overhead expenses you are paying in order to operate the business.
Another is health insurance, both for you and your family if you have legally registered them as employees. Self employed qualified retirement plans and the cost of hiring a nanny for your baby so that you work are also deductible items. In addition, you can deduct half of your self-employment tax from your adjusted gross income.
You can avail of these deductions by filing the relevant IRS form.
- Comply with the law to avoid paying penalty
If you think you will have to pay $1,000 or more, including self-employment tax, when you file your return, then you must have to make estimated tax payments in four annual installments. Be sure that you pay enough estimated self-employment tax because wrong estimates could lead to penalties even if you are willing to pay the whole amount at the end of the tax year. Also, you wouldn’t want to surprise yourself with an IRS tax debt at the end of the tax year, which would certainly be a pain.
- Keep a good record of business expenses and income
You can use income data to estimate how much tax you may have to pay. And you can use all the records of business expenses like shipping costs and photocopying fees to reduce taxable income.
- Hire a professional
Get an attorney or an accountant who can help you reduce your taxes, and comply with the necessary paperwork. Preferably, hire someone who specializes in self-employment matters and therefore is more familiar with the issues you are facing.
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