In this article, we will discuss tax filing strategies for the self-employed because filing your taxes as a self-employed person can seem like quite a task. And, if you have never filed business taxes before, you might not know where to begin. So let’s get started.
Separate Your Business Finances from Your Personal Finances
Most first-time business owners tend to mix their business and personal finances, which may cause them to mess up when filing their taxes. One of the most common ways most self-employed people get into tax trouble is by having their personal expenses recorded as business expenses.
The first thing you should do when you start a business is to create a new bank account. Having separate accounts makes filing taxes easier. This is because you’ll have your own private personal transactions and clean and accurate business records.
Keep Clean and Accurate Records
Filing taxes is easier when you have accurate records. And having all your invoices and outgoing receipts with you or using software that calculates the taxes is an efficient way to do it. It may also get you out of trouble if the IRS comes knocking on your door.
Familiarize Yourself With All the Tax Jargon
You should take some time and learn all the accounting and tax jargon that will help you understand your finances better. Some of the standard terms you need to familiarize yourself with include:
- Revenue — the amount you earn after selling your produce/ services.
- Cost of goods sold — the amount of money you spend producing goods.
- Gross profits — the amount left over after subtracting the cost of goods sold from the revenue.
- Net sales — the total profit made after deducting all expenses incurred from the revenue.
Pay the Estimated Quarterly Taxes
The IRS requires all businesses that owe more than $1,000 to pay quarterly taxes yearly. Start by estimating your yearly tax bill and fill out the tax form on the 15th of these months; April, June, September, and January.
Plan for Payroll Taxes
You are legally obligated to pay some employment taxes if you have steady staff on payroll. Some of the taxes you need to consider per employee include:
- Federal income tax
- Social security tax
Some apps and software such as Gusto, Homebase, and ClockedIn can assist you in planning the appropriate employment taxes and ensure you comply with all tax laws.
Get Professional Advice
Taxes can be confusing for business owners; just because you’re good at running a business doesn’t mean you are good at accounting or tax preparation. At Quantum Strategies Wealth Advisory, we take a unique approach and act as “business advisors,” working in collaboration with our clients’ accountants, attorneys, and other professionals. Our team is happy to make an introduction on your behalf to a qualified tax professional. Contact us when you’re ready!
Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.