Making the transition from working for someone else to being your own boss is a pretty awesome feeling. That said, there are lots of things you need to take into consideration to make the transition as smooth as possible. Taxes are one of the things you need to think about, so you don’t find yourself in trouble when tax season comes around.
Your Added Tax Burden
One important thing to note about taxes as a self-employed person is that they are higher than what you pay when you work for a business. Your employer was responsible for paying some of your social security and Medicare taxes, but now you are responsible for everything yourself. This increased tax burden can be intimidating but knowing about it in advance will make the transition a little bit easier. Do some research on taxes for self-employed people so you know what you are up against.
Structure Your Business Properly
Choosing the structure of your business will have a profound effect on your tax situation. Making the correct choice for the business structure will help you to save on taxes and avoid overspending. It’s best to consult a tax professional when selecting the right structure for your business. They can help you make the right decision, so you don’t end up paying for it on your taxes for years to come. Talk to them about the various structures so you can be informed moving forward.
Take Advantage of Deductions
It was mentioned earlier that your tax burden is higher when you’re self-employed, however, in that situation, you can deduct your business costs to offset the additional burden. Deducting your business expenses is a legal way to decrease what you owe on taxes so that you can keep your costs a little lower and be reimbursed in part for some of your business expenses. Even things like office supplies and travel you do for work can be deducted, so make sure to track your expenses carefully so you can deduct them appropriately when you finally file your taxes.
Taxes can feel complicated and overwhelming, especially when you are running your own business, so it is in your best interests to know what you are getting into in advance. Learning about tax implications for a small business owner will help you to ensure your own success. The more you know, the better it will be for you and your business in tax season and all year long.
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