The Tax Liabilities of self Employment | FloridaBankruptcyBlog.com The Tax Liabilities of self Employment – FloridaBankruptcyBlog.com
There are a thousand and one details to attend to when you are self-employed, but one huge detail that you don’t want to overlook is taxes. No matter what country you live in, taxes affect all aspects of your business – everything from the price you set for your services/products to the amount you actually wind up with when all is said and done. Be sure to take them into account.
If you are in the U.S., tax liabilities for the self-employed come in several flavors. If you have a retail business, frequently you must collect and pay state, local, and municipal taxes on a regular basis. This means that you must be sure to charge the correct percentage on each sale, and to complete & file the necessary paperwork with the taxing authorities. Depending on the volume of business you do, you may be able to do this on either a monthly or quarterly basis.
Next comes income tax. Like everyone else, you must pay income tax on the money you earn. But when you are self-employed you’re responsible for figuring and filing those amounts yourself on a quarterly basis. If you also have a "regular" job, and only make a small amount of money from self-employment, you may be able to have an additional amount withheld from your employment checks so that filing on a quarterly basis could be unnecessary. Call the US IRS or visit their website at http://www.irs.gov/ for specific tax advice.
Next comes Social Security and Medicare taxes, which is called "self-employment tax" for those that are self-employed. When you work for an employer, they pay part of these taxes on your behalf. But when you’re self-employed, it’s up to you to be sure that the entire amount is paid. You may also be required to pay an Excise tax, depending on the type of business you have.
The methods in which you go about paying all of these taxes will also vary depending on the form your business takes. It’s my understanding that there are different rules for sole proprietors, partnerships, S corporations, corporations, etc.
The biggest tip I can give is to keep excellent records of anything that could be even remotely tax-related (your car’s driving and maintenance record, business-related travel expenses, advertising, utiltiies, etc) and to be sure to file on time, honestly and accurately. The penalties for not doing so can be stiff. I also highly recommend consulting a tax specialist regarding these matters, as this article reflects only my personal experiences and should not be construed as tax advice.
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