Self-Employed Taxpayer Resources
At a time of continuing high unemployment, millions of people are taking matters into their own hands and creating jobs for themselves through self-employment. One out of three new jobs is created by self-employed startups. Since 1980, nearly all net job creation in this country has been through businesses under five years old. But to succeed, these new entrepreneurs – need to pay taxes and stay in compliance with tax law. If you’re looking for more information on paying estimated taxes on your business income, and documenting your expenses through recordkeeping- YOU’RE IN THE RIGHT PLACE. Start by watching this YouTube video from Francesca’s Tax House!
Check out our Top Ten Tax Tips for the Self- Employed!
Estimated taxes are payments made to pay the IRS on a quarterly basis (every three months) so you do not have to pay interest on the tax you owed throughout the year. The IRS wants its money as you make it. They will charge you interest if you wait until April 15 to pay your taxes. Estimated taxes are required for people who:
- Expect to owe at least $1,000 in tax and
- Expect withholding plus refundable credits to be less than 90% of tax calculated on your tax return or 100% of the tax shown on your 2015 tax return
- Note: Estimated taxes are not required if you had no tax liability on your 2014 tax return
Seem like a lot? You can pay estimated taxes for 2016 with your refund from your 2015 return– just ask your tax preparer how. Or, you can send in payments on a quarterly or monthly basis using the form 1040ES. Read more on estimated taxes here. In order to figure out your income, and deduct your expenses, you will need to have a good record-keeping system in place.
With recordkeeping, having a system is key. There is no specific requirement on the types of records to keep, but they must be sufficient to prove all income and expenses of the business; click here to see examples. You may consider purchasing software, or hiring an accountant to help with your records. If you are don’t have employees and had less than $5000 in expenses, and less earn than $54,000 you may qualify to have a Schedule C-EZ or Schedule C prepared for free as part of your tax return at a Volunteer Income Tax Assistance Site near you!
Print one of the following one-pagers for top ten tips and micro-enterprise organizations who offer free counseling, classes, and low-cost loans:
- Small Business & Your Taxes Tool – Montgomery County
- Small Business & Your Taxes Tool – Baltimore City
For more information on taxes and your business, please visit the IRS Self-Employed Individuals Tax Center.
Want more? Check out this Baltimore City resource: Small Business Assistance Packet published by the Downtown Partnership.
Visit the US Small Business Administrations Learning Center for information on a variety of topics, including Bookkeeping Basics: How to Set Up and Manage Accounts Payable.