Wednesday, April 13, 2011

Taxes Tips and Tricks

 Are you ready for taxes?  April 15th is coming!  Even though the government does give us until April 15th to pay our taxes for the previous year- it seems like it comes sooner and sooner every year.

I want to disclose that I am not a tax professional and not an expert but these are just some tips and things to think about so that you are prepared to file your taxes and hopefully not got screwed. :) I have also linked my resources if you need more information and some useful links.

1. Pay Your Taxes! Sounds easy right? Well being self employed I think the hardest thing is that you are given all your money at once and then hand over a check either at the end of the year or quarterly. How do you know if you need to pay taxes quarterly? If you have a regular job and your taxes are being with held from you W2 income then you are already getting your taxes with held but if your self employment income is thriving you might need to consider paying your taxes quarterly. If you are supposed to pay quarterly taxes there are penalties and fees if you don't pay.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.If you are filing as a corporation you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. IRS LINK

Need help figuring out how to pay quarterly taxes and more questions? EHOW TURBO TAX

2.  The 1099 Form.  If you are doing business with someone and you are writing them a check.  You will need that person to fill out a w9 form which means you are paying the person as a 1099 employee.  Basically a 1099 form is an agreement that the person is going to pay taxes on their portion of the income is (what you cut them a check for).  They are responsible for that money with the IRS and paying their own taxes on that money.  Often realtors, contractors, brokers etc. are 1099 employees.  IRS LINK

3.  Staying Organized.  I might sound organized but I am secretly not! I have to set organizational goals with myself especially for this stuff.  Go through and organize your tax stuff at least once a quarter.  April/June/Sept/Dec.  If you get really busy then once a month but have a organizational easy tax goal- so that you are not pulling your hair out this time next year.  You will need to keep all your receipts and paperwork for up to 3 years but if the IRS finds that you understated by more than 25% then have up to 6 years to come after you. IRS LINK

This stuff is really important and hopefully I kept it brief enough for you to read most of it.  :) But if you are glazing over this information and are making money on self employment income- then go talk to a certified public accountant.  Typically a CPA will do a free consulting hour when you set up an introductory appointment not during tax season (Tax season: Jan-April 15th).  Happy Wednesday and lots of luck for taxes. :)

2 comments:

stace said...

Thanks so much for posting about this. As a self-employed piano teacher, I'm finding this stuff super important. Thankful for any tips like this!! :D

Jenn @ Live Love Life Now! said...

Great post Erika! I just finally filed our tax returns last night and it felt great to cross that off the list :)

This will be the first year that I need to worry about paying quarterly tax estimates but fortunately I work with financial advisors and CPA's who can guide me if I get too confused along the way :)

Your tips were great though and are a huge help to anybody who has never had to deal with this stuff before. Keep the tips coming!!