Owning and operating your own small business has multiple rewards: you’re living your passion, you have flexibility in choosing your work schedule, and the only person you answer to is the one in the mirror – oh, and the IRS. Yes, the downside is that by being self-employed, you are also responsible for figuring out your business taxes, not to be confused with your personal taxes.
Perhaps you think you aren’t a small business owner, you’re just freelancing – writing blog articles, or mowing lawns, cleaning windows, babysitting – making extra money for savings before heading back to school, or before starting that new job, or while staying at home with the kids. Little did you know that you are a self-employed independent contractor. As a sole proprietorship, one-person LLC, or independent contractor, this means you’ll be completing a Schedule C or Schedule C-EZ with your individual Federal Income Tax Return. And if you’ve made a net income of at least $400, you’ll also have to complete a Form SE for Social Security/Medicare. If you have a significant income you will also be responsible for estimating quarterly withholding taxes. (https://blog.turbotax.intuit.com/self-employed/self-employed-tax-tips-summer-jobs-23345/)
Keep track of your Income & Expenses
Since your taxes are based upon your income, and your taxable income is lowered by your business expenses and deductions, it is imperative to keep track of all of this information.
Independent Contractors. One handy way to keep track of your business mileage is with a small notebook kept in your vehicle – write down date and mileage for any work-related travel. Keep track of your income with a sales receipt book. (Your customers will appreciate a receipt as well). Two ideas for handling your paperwork include using an expandable portable file, or simply using two large manila envelopes – one labeled Income and the other Expenses, appropriately dated.
Small Business/Sole Proprietor LLC. As your income becomes more significant and your expenses/deductions more complex, it is important to decide what your data entry requirements are for day to day Invoicing & Accounts Receivable, Accounts Payable, Payroll, Quarterly Withholding, and more. Accounting and Tax Preparation take so much time and specialized knowledge that hiring an expert in the field is often the most cost-effective direction to take.
Advantages of Using an Expert
A critical resource for any small business is a Tax & Accounting Professional. As a small business owner or independent contractor working to keep expenses as low as possible while conserving your valuable time, it makes sense for you to let an expert handle your monthly financials for a low affordable fee. It saves you time, money, and the headache of trying to figure your books out yourself; it eliminates the need for extra personnel and the consequent employee turnover. The professionals at Foster Financial CPA have the experience and services to meet any need you might have – including cash flow management, small business accounting, tax preparation, and planning, or business consulting, for a low fee that leaves you free to just do your job. Please contact us today.
Tax Tips for the Self-Employed
An Overview of the Net Operating Loss Tax Provisions in the CARES Act
How To Decrease Your Small Business Debt? A Step-By-Step Guide
Why Every Small Business Needs a Bookkeeper?
Tax Credits That Could Benefit Small Businesses
Why You Should, and Shouldn’t, Apply for a Tax Extension