4 Tax Tips for Owning Your Own Business
Being a first time entrepreneur can be both exhilarating and confusing. When you start your own business, you know that you’re doing something that you like to do and are good at. However, starting your own business can also be confusing because you have to do your own payroll, take out your own taxes, and more. Don’t let those financial and tax issues dissuade your from doing what you love. Here are a few tax tips for entrepreneurs to keep in mind when starting their own business.
Set Aside 20%
The great thing about owning your own business is that you get to be your own boss, set your own hours, and do what you love. On the other hand, you’re going to pay more in taxes than you would if you were employed by someone else. As a general rule, you should set aside 20% of your profits for taxes. This will probably be enough to cover both the state and federal taxes that you should be paying quarterly. If you don’t pay your taxes on time, you may be penalized at tax time and have to pay extra fees or fines.
Keep Your Accounts Separate
Another thing you need to do is open another bank account that will be used specifically for your business—apart from your personal account. If you have two separate accounts, it will be easier to track your businesses expenses and take out the taxes that you need to. Remember, you can always pay yourself on a regular basis out of your profits.
Track Business Expenses
You may pay more in taxes, but you also have the option of writing off all of your business expenses so you can bring your total tax amount down, but you’ll need to keep track of expenses that you incur to keep your business going. For example, you can write off a portion of your cell phone bill, your business computer, printer, or any materials that you need to buy to operate your business. You can also write off any contract workers you use. And you can track the miles on your car that you use for business and get a discount on your taxes as well.
Get an Accountant
If you run a small business, you probably don’t need a full-time accountant, but you will need someone to help total your quarterly tax liability and pay the government. Your accountant can also help you find deductions and answer any tax questions you have. Most quarterly tax accountants won’t cost you very much and they are definitely worth the cost to save you money and keep all you finances in order.
Starting your own business may be one of the best things you ever do. You can do what you love, and have the potential to make much more money than you would if you worked for someone else. Just make sure you keep all your taxes in order and you’ll be in great shape.
Diane Johnson graduated from the University of Utah. When she's not traveling she enjoys writing articles about adult education, reading books, and shopping.
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