Tax Laws for Being Your Own Boss
Being your own boss definitely has its advantages — flexibility, upward mobility, the chance to take your business in the direction you choose — but at tax time, being self-employed can be a challenge. Here’s a look at what’s expected of you when you go to work for yourself.
Self-employed people must pay self-employment taxes
As a business, you are required to pay self-employment taxes, which include Social Security and Medicare taxes. These must be paid by anyone who works for himself or herself and earns $400 or more in 2017.
Self-employment taxes are assessed on a percentage of your net earnings. In order to calculate and pay this tax, you must first figure your net profit from your business.
Schedule and keep current with estimated tax payments
Our tax system is pay-as-you-go. If you work for someone else, your boss withholds a percentage of your paycheck for taxes and sends that money to the taxing authorities on a regular basis.
As a self-employed person, you have the responsibility of paying quarterly estimated tax payments for both income tax and self-employment taxes. If you fail to make these periodic payments or you underreport your income, you may be subject to penalties and interest.
Take advantage of all available business tax deductions
As your own personal employer, you can write off far more business expenses than employees even dream about, and you’ll want to take advantage of every one of them. The IRS defines deductible expenses as any and all expenses that are ordinary and necessary for your business. A few common business deductions you won’t want to miss include:
WORKING FROM HOME…IS IT RIGHT FOR YOU
You may be drawn to the advantages of working from your home. Ask yourself a few questions to determine whether having a home-based business is right for you.
When you decide you are ready to launch your home-based business, consider the following suggestions: