It feels great to be your own boss, doesn’t it? Not having to worry about someone breathing down your neck, micromanaging your tasks, and, if you work from home, dress code. Another big perk is you set the market for what you want to get paid.
Alright, so, you are working for yourself, making good money, making your own rules, but are you keeping your taxes in mind? No matter what type of work you are doing or how much you are getting paid, you should be paying taxes.
While working for yourself, you get paid, usually into your personal bank account. Even though it is not recommended, this is a perfectly acceptable place to keep your business funds. It may get confusing when it comes time to pay taxes.
An easy rule of thumb to remember is to put back about 30% of each month’s profit. Profit is your revenue minus business expenses. This money should be earmarked for tax purposes, better yet, move it into a business savings account.
This money will then be used to make quarterly “estimated tax payments.” Since you do not have an employer withholding taxes from your check, this money pays for social security, income taxes, and Medicare.
Here is a great resource from the IRS website to help you calculate and make your estimated tax payments.
You may have read in our previous blog about ways small businesses tip off the IRS, not paying your taxes is an easy way to get you and your business audited.
Working for yourself is a great way to make a living, but it does have the stress of putting every aspect of the business on your shoulders. Does all of this seem a little overwhelming and something you do not want to deal with? If so, be sure to research concord small business accountants and let them manage this for you.
Not only will your accountant help manage your finances and make sure your taxes are paid, but they will be able to create a plan for you. This includes how much you should get paid, where to reinvest, and of course, making your tax payments.