Tips for self-employed taxpayers
Small business is the backbone of America many say. Whether you operate a small landscaping business or a professional services firm there are several common issues and concerns about accounting and taxes. Self employed individuals also have different options for investing for the future.
Every April self-employed taxpayers calculate income, expenses and deductions to keep as much of what they earned as they can. For people who follow the recommended quarterly estimated tax payment plan, the final tax preparation should be stress free because they paid into the system all year long and might get money back. For many other self-employed individuals, filing taxes every April means you have a large tax bill and owe thousands of dollars or more to the IRS.
While you can work with the IRS on payment plans and solutions to manage your IRS debt and payments, the experience of not having the money set aside to pay income tax may be something you want to prevent in the future.
Based on your recent accounting and tax returns, you should be able to anticipate how much of your income needs to be sheltered and used to pay income taxes.
When you receive a paycheck and your taxes are withheld by your employer you do not really feel that money coming out of your check as you get used to the idea that the net amount is what you have left to spend. The challenge to self-employed business owners is to have the discipline to set estimate and set aside money to pay quarterly tax payments.
There are apps you can use to automatically set aside money for taxes. Your bank or credit union may also offer an income tax collection solution where a percentage or fixed amount of every deposit is automatically separated into another account the owner cannot access until it is time to use that money to pay taxes.
Saving self-employed income for the future
What are your options to save for retirement when you are self-employed, and nobody is offering you a 401(k) plan or pension? If you pay attention to advertisements in print and media, there are several advertisements for investing for the future when you are self-employed.
Consider a collection of information offered by CNN Money, the Ultimate guide to retirement for self employed individuals. Another key to saving for the future is budgeting to have money automatically withheld from your regular income that you don’t miss while that money works for you to either pay your taxes or invest in your future and retirement.
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