When it comes to self-employed individuals, the task of small business accounting and small business tax preparation can be extremely stressful. When you are a business of one, not only do you have to keep a careful and detailed account of all of your business deductions, the compiling of income documentation can be very cumbersome.
Most self-employed people receive income from more than one client, source, or business. For each, a thorough detailed record is required for income verification. You also have to be sure you receive the appropriate forms for each of your clients.
Are you really self-employed, or is it just a hobby?
What it takes to be in business!
All About Self-Employed Taxes
Are you required by law to file?
Then there is the process of determining your filing status, as well as figuring out if your income falls into the threshold which requires you to file income taxes. For self-employed individuals, even if your income is below the threshold requiring you to follow, it is often necessary to file your taxes anyway. This is because if you are filing with a partner, your income will have to be combined with hers. Additionally, your finished tax return is the best piece of documentation you can have to verify your income.
When it comes to small business accounting, including self-employment, it can be far more complicated to determine so many different aspects of how you should file, and what documentation you need. This is where your Fort Collins CPA comes in. They are familiar with the complexities of small business self-employment taxation, and won’t struggle to try to figure out which tax form, documents, and other paperwork you need. Also, they will be able to place you in the most appropriate filing category for your specific needs, whether that is a 1040 or a 1040 A. Your Fort Collins CPA will also be aware of numerous deductions and tax payment options, some specific to your area and even your business itself.
Paying Your Taxes
Additionally, as a self-employed individual, you have access to all the “tweaks,” and deductions that any business has. You are probably aware of some of them, but not all. One example of these “tweaks,” is when and how often to make your tax payments. Your Fort Collins CPA can help you determine which payment method is the best for you, based on several factors. For example, an annual tax bill can be quite burdensome, and most self-employed individuals and even several businesses opt for quarterly payments. You can also do a monthly payment. You do have several options when it comes to paying your federal and other taxes.
What can a self-employed individual deduct?
If you are not sure which items can be deducted, ask your small business accounting specialists. Essentially, ANYTHING that you buy, rent, or put any type of money into that is for your business usually qualifies as a deduction. Some things can be deducted entirely, others only partially.
It is prudent to start a filing system for your expenses. Any online software you like will work, but be sure and save all your receipts as well. You will usually be required to have tangible proof of your expenses. Your accountant can advise you, anytime, when you are not sure what to keep a record of. Additionally, they will know which accounting software can be the most useful and appropriate for your record-keeping, should you determine this is something you need.
If you work from home, there are several deductions for the self-employed individual. These involve determining the square footage of the workspace, as well as evaluating how much of your business time is used in that space. If for example, you rent a small warehouse, this will certainly be deductible. If you work from home, this may not be deductible — it depends on how much of your actual work is carried out from your home.
And, some things you purchase for work will actually not be considered deductions by the IRS, but investments. A simple example: you purchase a delivery van for your self-employment, thinking it will serve as a write-off. However, the IRS may see it as an investment, and not allow you to deduct the delivery van, but allow you to deduct mileage used on it for your business, maintenance costs, and other specific business-related expenses.
The IRS categorizes some of your expenses as capital, and others as expenses. And, these guidelines change frequently. Don’t assume, ask. When it comes to small business accounting, you need this information to determine what you should invest in. Your Fort Collins CPA can let you know if a specific item, piece of equipment, or service is deductible, and if so, how much.
The self-employed small business owner often can benefit more from the professional services of an accountant than just about anyone else. If you are self-employed, call your Fort Collins CPA and let them guide you through your taxes, you will be very glad you did.
