It’s exciting to be in business for yourself! You get to call the shots. You get to make the decisions. You also need to pay close attention to your cash flow, expenses, and taxes.
When you work for an employer, your earnings are taxed at a 6.2% rate for Social Security and 1.45% for Medicare. Your employer also pays the same amount, 7.65% of your pay. However, when you work for yourself, you are considered the employer and the employee and you are responsible for paying both halves. The Self Employment taxes total 15.3%.
What is self-employed income? Any earned income for which you receive a form 1099, or no form at all, is considered self-employment income. Examples include a home-based business, independent contractor, or freelance work.
Self-employment income is calculated after your allowed business deductions are taken out. Use our Self Employed Worksheet to help you determine what you can deduct and get organized before your appointment. We will review every available deduction and see if it applies to your situation.
A couple of the common self-employed deductions include…
Business use of your home: If you use any part of your home strictly for business, you may be able to deduct certain expenses. These include mortgage interest, insurance, utilities, repairs, depreciation. We will look for every available deduction so we can minimize your net income and help keep your money in your pocket.
Business use of your vehicle:
If you use your car for your business, you can use either the standard mileage deduction or actual expenses. Most people use standard because it’s easier to track. We will work with you to decide which method would get you the largest deduction. And we’ll help you put a system in place to track mileage.
In case you’re audited, you’ll need to keep good records.
There are several other kinds of expenses that you may be able to deduct. Other expenses include things like employees’ pay, retirement plans, rent, interest on loans, certain taxes, and insurance. We will ask you about all aspects of your business so that we don’t miss any deductions.
You may need to pay quarterly estimated payments. You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when your return is filed. We will calculate whether you need to make estimated tax payments and if so how much you should send each quarter. We will print quarterly payment vouchers so all you have to do is write the check and mail it.
Call now to schedule your appointment.