February 3, 2020 | Tips, Tricks and Member Safety. Share this article:
I’ve Started My Own Business, Now What?
Congratulations! As you start to find your bearings and navigating your way as a new business owner, it’s important to remember certain tax implications. Here, we break down a few tips to get you off on the right tax foot and keep your business running smoothly throughout the year.
1. Keep records. It seems pretty elementary, doesn’t it? But it can’t be emphasized enough. While the IRS doesn’t dictate what kind of records you should keep, it does require that the records be complete and accurate. So don’t just stuff your receipts in a drawer, start now and organize expenses and receipts and keep a log.
2. Deduct an office in your home. There are a lot of rumors about home offices triggering IRS audits. Don’t let those stories keep you from taking a home office deduction if you qualify. If you regularly and exclusively use part of your home to perform administrative or managerial activities for your business, you may be able to claim a home office deduction for a portion of your utilities, rent or mortgage interest, depreciation, cleaning and the like.
3. Report your income. You may start seeing 1099-MISC forms from your contract work or possibly 1099-K forms to report your income, but you may not receive the tax forms to report your income. 1099-MISC will only be issued if your client is paying you $600 or more for your work, and you will only receive a 1099-K form if you accept payment through a third party provider, have more than 200 transactions, and make more than $20,000. So keep track of all income you make since you are required to report all income.
4. Set money aside for income taxes. In the United States, we have a “pay as you go” tax system. That means the government expects to receive most of your taxes throughout the year. Employees typically have taxes automatically withheld from their paychecks. If you are self-employed, you most likely don’t have taxes withheld from your pay throughout the year and are instead subject to quarterly estimated taxes. In general, you are expected to pay estimated taxes if you expect to owe $1,000 or more annually for your taxes. For the 2019 tax year, quarterly estimated taxes are due by April 15, 2019, June 17, 2019, September 16, 2019, and January 15, 2020. Remember, you don’t have to make your 2019 4th quarter payment if you choose to file your full 2019 tax return by January 31, 2020, and pay the entire balance due with your return.
TurboTax Self-Employed Has You Covered
Don’t worry about remembering all this come tax time. TurboTax Self-Employed has you covered and will help you uncover business expenses to help you save on your taxes. As a member of COPFCU, you can save $15 on the TurboTax Self-Employed product, PLUS you get a one-year complimentary subscription to QuickBooks Self-Employed* to effortlessly track expenses, jobs and mileage throughout the year. When you are ready to file, click here to access TurboTax and your savings.