Self-employment offers a variety of advantages, including autonomy and potentially higher rewards. However, working for yourself does have serious tax ramifications, of which many people are unaware until they're already facing steep income tax bills.
According to Costin & Company, CPA’s, accounting experts based in North Ridgeville, self-employment impacts your taxes in a variety of ways, including:
- Self-Employment Tax: When you work for another company or individual, your employer is responsible for a portion of your Medicare and Social Security taxes. Self-employed individuals are subject to the Self-Employment Contributions Act (SECA), which means paying the full burden of these tax-funded programs. Hiring an accountant as soon as you set out on your own can prevent unexpected surprises at the end of the year.
- More Deductions: In addition to half of your self-employment taxes, having your own business provides the opportunity to take many more deductions than most employees would, including any travel expenses related to your business. Consult with a tax professional to ensure that you're getting all of the deductions you're entitled to.
- Quarterly Payments: Most employers withhold income, Social Security, and Medicare payments from each paycheck, but as a self-employed businessperson, you're responsible for submitting these funds yourself. The government prefers you pay estimated taxes on a quarterly basis. In addition to helping you avoid having to pay a single large sum, paying estimated taxes can also help prevent late fees, payment plan expenses, and other penalties many self-employed workers encounter.
Whether you're an experienced entrepreneur or are setting off on your own for the first time, Costin & Company, CPA’s has accounting and tax services that are truly second-to-none, from self-employment tax preparation to expert Quickbooks training. Learn more about their commitment to their clients' success on their website, or call (440) 327-0720 to schedule an appointment with an expert member of their team today.