SETTING UP YOUR OWN BUSINESS. START YOUR LLC OR INC TODAY! CALL US AT 609 948 3446 Here are some tips we can help you with if you are in business for yourself or just now deciding to take the plunge! If you provide services as an independent contractor, each business that engages you will ask you to complete and provide them with a copy of IRS Form W-9. This is the way you provide and certify your contact information and Social Security number to the business that hired you. The hiring company will issue you an IRS Form 1099-MISC and provide a copy to the IRS for the amounts paid to you during the year. If you are self-employed and have a net profit of $400 or more, you have to pay self-employment tax (SE). SE tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. However, since you have no employer, you are required to pay both the employer’s and the employee’s share of the social security and Medicare taxes, thus making the SE tax double what an employee would pay. However, you are allowed to deduct half of your self-employment tax in figuring your adjusted gross income. Since you do not have an employer to withhold taxes from your pay, you generally will be required to make estimated tax payments to cover your income and SE tax liabilities from your self-employment. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you end up owing taxes when you file your tax return after the end of the tax year, you may be penalized for underpayment. If your taxes from self-employment are small and you have other income from employment on which tax is withheld, it may be possible to adjust the withholding to cover the taxes from the self-employment. You can deduct the costs of operating your business including expenses, cost of goods sold, and depreciation on capital assets used in business. Temporary liberal expensing and depreciation rules mean that most small business owners can fully deduct the purchase costs of nearly all capital assets placed in service during 2010 and 2011. However, careful tax planning is needed to maximize the benefits of the write-offs. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary. If you also resale products, you probably will be required to obtain a resale permit from your state, and collect and remit sales tax to the state on a periodic basis. Depending upon the location of your business, you may also be required to obtain a business tax permit, which is really a way for the local government entity to collect tax on your sales. In addition, if you have fixed assets that you use in your business, the local government entity will probably assess a personal property tax based on the value of the assets. We can help you with any or all of the above. Please like us on facebook/patriottaxresolution. For questions or information please call us at 609 948 3446 or support@patriottaxresolution
Posted on: Fri, 27 Sep 2013 18:10:12 +0000
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