If you are self-employed and get hit with a hefty tax bill when you file your taxes each year, you may want to revamp the manner in which you handle tax planning steps. Tax planning should involve estimating your income, saving money on a recurring basis, and seeking investment perks that could lower your tax bill.
An Earnings Estimate
If you are unaware of what tax bracket you will fit into, you could wind up with an unexpected tax bill amount when you go to file your taxes each year. An automated program that allows you to record your earnings can be used for tax estimate purposes. Upon recording your income through an automated program, you can use a tax calculator to determine how much money you will be liable for paying when you file your taxes.
This estimate can help you pinpoint a monetary amount to save back each week. If you decide to pay quarterly taxes, instead of waiting to pay what you owe when you file, you will gain more control of your financial situation. Even if you decide to forego paying quarterly taxes, you will be provided with a tax liability estimate.
Investment Perks
A person who is self-employed may be able to take advantage of some tax breaks that they wouldn't be eligible for if they worked for someone else. Eligibility requirements will be based on the actual wages that are earned. Investing in new equipment may grant you the opportunity to take some deductions. Once you purchase a new piece of equipment that will be used for business purposes, it begins to depreciate.
If you are going to use a new item for a tax write-off, it may be in your best interest to make an investment before the end of the year. Research what types of equipment will be eligible for a deduction. Use an online calculator to determine how much savings you will see by investing in new equipment. Deductions are not limited to the purchase of new equipment.
You may also be eligible for savings if you have a healthcare insurance policy that you pay out-of-pocket costs for or if you use an internet service provider or another service provider to keep your business up and running. If you are not going to be filing your own taxes, list the investments you make throughout the year and provide this information to the accountant who will be filing taxes on your behalf.
For more information about tax preparation, contact a local accountant.
Share2 June 2022
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