It's tax time, and most of us are concerned about paying what we owe for this year. After all, taxes can be pretty complicated for the self employed. However, what you should also be thinking about right now is next year's taxes!
A little bit of planning now can make an enormous difference in how things go in the next tax year for your home business. Let's look at some of the benefits of doing early planning, how to reduce the amount you're going to owe, and some commonly forgotten exemptions that could make a difference.
Planning in advance for your tax's next year gives you control. If you've been letting your taxes slide until the last minute - something many people do - it's probably an unpleasant and overwhelming process.
On the other hand, if you know what's coming and have a good idea what you can do about it, your trip through next year's filing season will be smoother sailing. While you can't anticipate every possibility, you can avoid a lot of the common pitfalls just by having a plan.
One important thing to do if you haven't already, and you want to get the most out of your return, is to get an accountant. Filing on your own might seem like it'll save you a lot of money, but you're not a trained professional and you don't know the ins and outs of the regulations. That's likely to get you in trouble if you're not careful!
A good accountant that you trust will save you a lot more than you pay for their service, just by knowing the optimal way to file.
Of course, your accountant can only do so much if you don't give him the proper information. Don't be tempted to leave things totally up to the professional, even if it makes the process seem easier.
You need to know what's deductible in your business and turn over every piece of information you have pertaining to your income if your accountant is going to be able to help you. In the end, it's your responsibility, not hers, to know what's going on, and knowing about your tax obligations is an important way to save in the long run.
You should also do your bookkeeping more regularly - once every month, not once every year. If you're like a lot of people and you wait until January to work on your bookkeeping, you shouldn't. Once a month is a good way to get feedback on your business and calculate the estimated tax you're going to owe.
Set up an escrow account for these taxes - if you have the money to pay estimated taxes in advance, do it! That stops you from dealing with late fees and having to come up with thousands at the end of the year. Use automated bookkeeping software - it's worth the extra cost for the convenience it allows, and it's deductible!
Prepay any deductible expenditure's before the end of the tax year to get a better result. Mortgage payments and similar expenditures are a good choice that many people forget about. Prepay state taxes, too, as well as any other business related expense that you can deduct, and there are a lot of them!
Remember to take a look at law changes, as well. Various incentives and deductions are only available for a given period of time, and may expire without your knowledge, making your taxes more complex. However, if you plan ahead and learn about what you're likely to owe, you'll find your taxes next year are a lot easier to deal with.
Taxes are paid differently when you own a small business than personal taxes. You may use different forms and depending on how in depth you need to go, you may need to hire an accountant to do them.
This article will show you some of the different things that are required for small business taxes. Please remember these are only meant to help you. If you have questions or want to make sure you have done it correctly, please contact your local accountant or contact the IRS.
When you work for yourself you need to pay Social Security and Medicare taxes. This is called self-employment tax. You can use a Form 1040 to help figure out how much you need to pay. The government has set up percentages for Social Security and Medicare. These rules and laws could change from year to year, so you will want to make sure you go to irs.gov to get the latest information.
You must use either a tax id number or your social security number when you file these taxes. The government will issue these if you do not have one or both of them.
You must pay self employment taxes if you make over $400 in a year. If you make under $400 you don't have to claim it on your taxes. This amount is your gross earnings. The taxes are based off of the amount you earned for the year.
Some may think if you work your business part-time that you don't have to claim it. This is a myth. You are considered self employed if you make any amount of money whether you worked the business full time or part time. If you do things for people or people purchase things from you and you make money, you are self employed unless it was a one time thing and you never do it again.
When you pay your taxes, you can do it quarterly or yearly. If you make a large amount of money you should consider filing quarterly. If you don't, or you can save diligently, you can put an estimated amount in a savings account. When you file your taxes at the end of the year, you will have that money and hopefully it will be enough to cover the whole amount.
There are several types of business structures that may change the way and the amount that you file for taxes. It will also determine the form you will need to use when you file. There is a sole proprietorship, partnerships, corporations, s corps, and limited liability companies. There are websites that will help you determine which structure is right for you. You may also want to contact an accountant or attorney to help you with this determination.
Keeping receipts and all important documents is another important thing with your business. You need to keep receipts for every item purchased whether it was a tablet of paper or advertising in a newspaper. These are items you will be able to add to the forms and you will need the receipts as back up to the form.
When you are first starting your home business, it's a good idea to decide how you are going to file your taxes. Visiting a website like irs.gov is one way to get all the information you will need. Another way is to contact an accountant or lawyer. Paying taxes is a must when you are self employed. Filing right from the beginning will be a benefit to you in the long run.
posted by Chris Simpson
No Comments »
"TOP PICK" OPPORTUNITIES
Jobs!
Offering multiple income sources. 90 day no questions asked
Risk FREE Trial! Start earning TODAY!
Subscribe
To The HomeNetPro.Com
Chronicle
