Working a traditional 9 to 5 job is not for everyone. Some people crave the freedom that comes with being their own boss. Not only do you have the ability to work when and where you want, but you have more job stability in your life.
Being self-employed does come with a couple of extra responsibilities, however. One of the biggest of those responsibilities is managing your self-employment tax. Read on to learn all about it!
Keep Detailed Records
The most important part of handling taxes or managing your own employment is to keep documentation of everything.
This means you’ll want to keep track of your income and expenses. Make copies of checks you receive and save receipts for any of your expenses. You can even create check stubs for each independent job that you do to make calculating your total income much easier.
You’ll also want to keep track of any bank statements, profit and loss statements, and expense ledgers. Maintaining good records will help make your life much easier when it comes time to file taxes.
Plan on Paying Throughout the Year
You might think that you only have to pay taxes once per year, but you actually have to pay throughout the entire year. People who work in traditional jobs have taxes deducted automatically from their checks and then either receive a refund during tax season or pay what they owe.
People who work independently should plan on paying taxes once per quarter. You’ll want to estimate how much you owe in taxes each quarter and send a payment off to the IRS as well as your state if you pay state income taxes. It might seem like a hassle, but it’ll save you from being slammed with a massive tax bill at the end of each year.
Take Steps to Reduce Taxable Income
Even though you work independently, you can still take steps that’ll reduce your taxable income.
For example, you can contribute to a retirement plan like a 401(k) or IRA. You can also deduct expenses for running your own business from your income. Common deductions include a portion of your rent or mortgage if you work from home, use of your car, as well as any purchases you make for your business.
Ask for Self-Employment Tax Help
If this is your first time filing taxes on your own as someone who is self-employed, then you might consider reaching out for help. A tax attorney or accountant can help you make sure that you’re doing everything properly and set you up for success in the future. It might cost you a little bit of money now, but save you big in the long run!
Are You Ready to Be Your Own Boss?
Becoming your own boss is like living out your dreams. You might be working hard, but all that hard work is going to your benefit. Once you get the hang of managing your self-employment tax, you’ll be set for life!
Do you want to learn more about everything from being an entrepreneur to planning your dream vacation? You’re in the right place! Check out the rest of our blog to learn everything you need to know to make your life incredible!