Three Keys to Self-Employment Taxes

When you become self-employed, you’ll find that a number of things change about filing your taxes. Self-employed people are often said to be their own boss, and as such they get to pay ALL of the taxes normally associated with payroll. There are certain advantages and disadvantages to this.

Don’t Forget to Pay Quarterly

During the tax year, you’ll need to pay quarterly payments to the IRS and perhaps your state to avoid penalties and interest. If you search for tax accountant near me Long Island NY, you’ll find help on estimating and filing these payments. If you wait until the end of the year, you’ll have a lot of money to pay, and some of it could have been avoided.

Keep Up With Your Expenses

You don’t have to pay tax on everything you earn, only the income that’s left after you pay business expenses. That’s why it’s so important that you keep up with every expense that you run up when operating your business. Don’t forget mileage. Mileage is one of the main expenses that small businesses run up, and can affect your bottom line (and your tax obligation) substantially. The IRS standard mileage rate is usually the best way to keep up with vehicle expenses, unless you’re operating a large commercial vehicle.

Keep Up With Your Sales

You also need to keep up with all of your sales, refunds, and any other revenue that may come your way, as these items make up your income. A complete bookkeeping system is essential not only for tax purposes but for business planning reasons.

If you’re like most small businesses, you’re a pass-through entity so these business records will end up on a Schedule C in your personal tax return. You may also have personal deductions, such as medical expenses and education expenses, but those will be handled separately on your return.