People who have been employed in traditional work settings are finding it necessary to supplement or replace their income streams. While some voluntarily leave their jobs others may be the product of downsizing and layoffs. But many who retain a passion for their profession find alternatives, such as outsourcing, to get back in the work force. It is important to stay abreast of tax laws that impact self-employed persons. Here are three important tax considerations.
Tip #1 Reduce Taxable Income
When filing income taxes many self-employed business owners are surprised to find that they could have lowered their taxable income and paid less in taxes during the year. It is important to have a plan in place that includes tax reduction strategies. For example, one often missed tactic is retirement savings. Contributing to a Self Employed Pension Plan is a great way to accumulate non-taxable savings and keep more of the money you earn. Speak with a tax accountant to ensure that you are maximizing benefits in this area.
Tip #2: Remit Estimated Tax Payments
Income tax withholdings are not taken out of payments that you receive as a freelancer. But just because no tax is withheld does not mean that the government is not looking for you to send them in. The top concern for most freelancers are how much to pay in estimated taxes and when to send them in. To determine the amount of taxes due you will need to compute your gross income. An income tax calculator and tax calendar are resources that help you estimate amounts and make timely payments. Additionally, if state and local taxes apply, you will need to remit payments to them as well.
Tip #3 File the Right Tax Forms
Freelancers can choose to operate as one of several business entities including Sole Proprietor, Partnership, Limited Liability Company, "S" Corporation, or "C" Corporation. Each of these options uses a different tax form for reporting purposes so make sure that you know which one to apply.
Working as a free-lancer has many benefits including flexibility and limitless income potential. At the end of the day it is not how much you make that matters. It is how much you are able to reinvest and multiply to create the lifestyle that you desire.
Tip #1 Reduce Taxable Income
When filing income taxes many self-employed business owners are surprised to find that they could have lowered their taxable income and paid less in taxes during the year. It is important to have a plan in place that includes tax reduction strategies. For example, one often missed tactic is retirement savings. Contributing to a Self Employed Pension Plan is a great way to accumulate non-taxable savings and keep more of the money you earn. Speak with a tax accountant to ensure that you are maximizing benefits in this area.
Tip #2: Remit Estimated Tax Payments
Income tax withholdings are not taken out of payments that you receive as a freelancer. But just because no tax is withheld does not mean that the government is not looking for you to send them in. The top concern for most freelancers are how much to pay in estimated taxes and when to send them in. To determine the amount of taxes due you will need to compute your gross income. An income tax calculator and tax calendar are resources that help you estimate amounts and make timely payments. Additionally, if state and local taxes apply, you will need to remit payments to them as well.
Tip #3 File the Right Tax Forms
Freelancers can choose to operate as one of several business entities including Sole Proprietor, Partnership, Limited Liability Company, "S" Corporation, or "C" Corporation. Each of these options uses a different tax form for reporting purposes so make sure that you know which one to apply.
Working as a free-lancer has many benefits including flexibility and limitless income potential. At the end of the day it is not how much you make that matters. It is how much you are able to reinvest and multiply to create the lifestyle that you desire.
To learn more about tax requirements and strategies for freelance business owners, visit the financial center at http://www.tbsusa.com. Check out the self-employment tax estimator and other tax tools that will help you maximize the money you earn in business.
Article Source: http://EzineArticles.com/5317950
1 comments:
Thanks for sharing such useful post with in which you are describing the great tips to save income tax. It doesn't matter how old you are, even old enough to collect social security, the federal government wants their part of your income. So an income tax calculator and tax calendar are resources that help you estimate amounts and make timely payments.
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