Joining The Ranks Of The Self-Employed? Make Taxes Less Of A Headache With These Tips
When you finally leave salaried work to start working for yourself, you may feel relieved. However, that relief can turn to concern when you have to deal with tax issues as someone who is self-employed. To avoid headaches due to these issues, make everything simpler for yourself by using the tips here throughout the year.
Get Separate Accounts for Work
One of the biggest mistakes that newly self-employed people make is that there is not a clear distinction between their personal checking account and finances and their work expenses and invoices. You might, for instance, think nothing of having a client write you a check and depositing it into the checking account you use for everything else. This can lead to muddled finances that have to be worked through when it's time to file your taxes. You will end up looking at pages and pages of account records, attempting to pick out each and every business-related item. To save yourself time and prevent aggravation, set up a separate banking account for all things related to your self-employment work.
Adopt a Simple Filing System
When you worked for someone else, you might not have gotten tax deductions for fuel, equipment and other things. Because of that, it may not even occur to you to hold on to various receipts over the year. As someone who now works for themselves, however, it is very important to hang on to every business-related receipt you've got so that you can prove how much you're spending on business-related expenses.
Saving receipts can become messy and cluttered, particularly if you're just stacking them up in the corner of your kitchen or office. Adopting a simple filing system where you've got a different folder for each type of expense is a smart idea. You can also scan various receipts and keep them on your personal laptop in different computer folders.
Set Reminders for Filing Taxes Quarterly
If you're new to self-employment or owning a business, what you may not know is that you need to pay your expected taxes quarterly instead of at the end of every year. Skipping this step could be a mistake, as you may find that your tax liability goes up; work with an accountant to figure out how much in tax you need to pay and set reminders so that you don't forget.
With these suggestions, there are fewer headaches to be had when dealing with tax-related issues. Working through tax considerations with an accountant when you first start up your business can help you avoid additional problems. For more information, contact a professional such as Hoff John CPA PC.