If you are self-employed you probably know you have to handle your taxes differently than someone who is employed. You have to pay your own FICA taxes and save for your own retirement. There are five key tax planning considerations to take if you are self-employed.
Understanding how taxes are calculated is crucial if you are self-employed because you need to pay your own social security and medicare taxes. To calculate your taxes you will need to use form 1040 and Schedule SE.
Estimating your tax payments is another important aspect if you are self-employed. Typically, you will need to pay your taxes quarterly to ensure that you are paying enough on your taxes and will not be fined a penalty.
Being self-employed means that you need to ensure you are saving for retirement. There are certain retirement plans such as a Keogh, SEP, Simple IRA, Simple 401(k), and individual 401(k) to choose from.
One tax planning strategy to keep in mind as a self-employed individual is all of the ways to lower your taxable income. Business deductions are a great way to do this. If you have any expenses that are considered ordinary and necessary you can use that as a deduction which reduces your taxable income. This means you pay less in taxes.
A final tax planning strategy is to consider your healthcare expenses as a deduction. You may be able to deduct 100% of your healthcare expenses as well as any contributions towards an HSA Plan.