Whether you are a sole proprietor or part of a partnership running your own business, there are a number of financial obligations you need to be aware of as you operate as a self-employed individual, especially when it comes to IRS issues.
Being a business owner of any sort is always a challenge, but when you function as your own boss, staying on top of your financial responsibilities can easily become overwhelming, particularly when you are unclear on the nature of those responsibilities. Do not let your confusion cost you big dollars. Keep yourself out of hot water with the IRS by following these three guidelines when you are self-employed:
1. Ensure you file your annual return. This essential process will keep you in the line with basic IRS tax filing requirements. You will need to report your income and any loss from your business using either a Schedule C or Schedule C-EZ form. If your expenses were $5,000 or less, you may be able to use the Schedule C-EZ form. You will also need to report your Social Security and Medicare taxes using the Schedule SE form. There are instructions for each form, which can be accessed via the official IRS website, as well as through your private accountant.
2. Make quarterly payments. Estimated tax is a method the IRS allows self-employed individuals to use in order to pay Social Security, Medicare, and income taxes. From there, you can make quarterly payments to settle the debt you owe to them. When you are self-employed, you do not have an employer withholding these taxes for you, so you are responsible for keeping track of and reporting them to the IRS on your own. Making quarterly payments helps keep you organized, ensures you are reporting and paying the correct amounts to the IRS, and also prevents you from having to pay one large, lump sum all at once.
3. Work with a professional. Working with a professional accountant and consulting with a qualified tax law attorney are crucial steps in protecting your business and your overall financial well being. An accountant can advise you on which forms to file with the IRS as a self-employed individual and can also help direct you as you work to manage your company finances. Accountants are especially important where record keeping is concerned. Accurate financial bookkeeping is a must when it is time for you to report your earnings and expenses to the IRS. Additionally, a tax law attorney can advise you on business tax matters in the event something goes wrong, or can simply help guide you in the steps you need to take to protect your company’s livelihood.
If you are self-employed and are concerned about your standing with the IRS, speak with a knowledgeable Cook County tax law attorney today for a personal consultation. Call the Law Offices of Eric G. Zelazny at 708-888-2299 to get started.