Being self employed is the dream of many people who want to be their own boss. The good news is that there are plenty of people who are living this dream every day. However, if you want to start your own business, it also means a lot more responsibility, inherently. This is certainly the case when it comes to managing finances and filing taxes. At Klingler & Associates, we have extensive experience, when it comes to helping self-employed individuals manage their own taxes, so that they can pay less and get the most out of their returns. Here’s some information about ways help self-employed business owners on a regular basis.
Pick the right entity
If you are self-employed, then you have already set up a registered a company with a business license, or will need to do so, eventually. The type of structure that you set up will have a major impact on how your personal income will be measured and will change the types of deductions and tax credits that you are eligible for. Typically, depending on what type of business you have, you will structure as either a sole proprietorship, an S- or C-corporation, an LLC, or partnership. Each of these types of entities will have different benefits and setbacks. Our firm can help you determine which one will be most beneficial for your bottom line.
The self employment tax
There are different taxes that you need to plan for when you are self-employed. Aside from your ordinary income and property taxes, there is also a specific self-employed tax rate of 16.75% for self-employed individuals. This tax breaks down to a 15.3% contribution to social security and a 1.45% tax for Medicare. The reason for this tax is that self-employed individuals don’t have an employer that is matching their contributions, and so their social security rate is twice as high as a typical social security rate.
Self employment deductions
Although there are other taxes that you have to worry about, as a self-employed individual, there are certain tax benefits, as well. There are plenty of deductions for self-employed people and people who start their own businesses, especially in a state that is as business-friendly as Utah. A few examples of these deductions for the self-employed include pretty much all business expenses, from business miles put on your vehicle to gas, to insurance, to property costs, to equipment maintenance, to office supplies, and so on. Even if you think you have a good understanding of what deductions you qualify for, we promise you that there is almost always more than you think. Please contact us today to learn more about how to increase the efficiency and returns on your taxes.