Filing Your Taxes Like The Boss You Are

Starting your own business can be an incredibly rewarding, and challenging, experience. First you have a vision, and then you turn that vision into something tangible. Perhaps you kick start your dream by entering into a partnership with other likeminded entrepreneurs or maybe you go it alone as a company of one. At some point your product or service will be out there for all the world to see and the profits will soon follow. With success comes responsibility, which usually takes the form of taxes in the case of bourgeoning businesses. If you are in the privileged position of being your own boss or work independently, you may be required to file self employment taxes. This brief introduction will help you understand the ins and outs of this type of taxation so that you can file with confidence in the years to come.

Why should I tax myself?

For most employees, taxes are automatically deducted from each paycheck by the employer. These taxes go to the Social Security Administration, contributing to Medicare and Social Security benefits that the employee may be eligible to collect later on. As a business partner or owner, it is very important that you file the appropriate taxes so that you continue to pay into your Social Security benefits. By being proactive and correctly filing your taxes now, you can rest assured that your Social Security benefits will be waiting for you if and when you need them.

How should I tax myself?

In many circumstances, both the employer and the employee pay a portion of the individual’s employment tax. Since you are essentially your own employee and employer as a business owner, you are responsible for paying the full amount. The self employed tax rate might vary from year to year according to changes in the economy, but the tax itself is comparable to the standard employment tax rate.

What should I tax myself?

Similar to the more traditional employment tax, the amount of taxes a self-employed person owes is calculated by considering a few different factors. The first, and primary, factor is the business’s net earnings. Your net earnings can be figured by subtracting any possible allowances and deductions from your company’s gross income. The type of business you own may also affect how much you owe in taxes. Another component to take into account when calculating your taxes is if you are both self-employed and employed by another. If you fall into both categories, you may owe self-employment and employment taxes.

It may seem intimidating to calculate your self-employment taxes, but don’t let it hold you back. Now that you have a general understanding of how these taxes compare to typical employment taxes, and how they are figured, you have the foundation of knowledge that you need to dig deeper. If you have questions about anything regarding how to file taxes as a self-employed individual, all you have to do is ask. Tax consultants are experts on the subject, while your fellow business owners can be eager to offer helpful words of wisdom on their own experiences. So the next time April 15th rolls around, just remember you’re the boss.

This entry was posted in Taxes. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *