When you are self employed you have to think about more than your salary and how well you can afford to pay the bills. You have to think about income distribution and quarterly tax filings. You also have to think about filing paperwork for independent contractors and anyone that you may employ other than yourself. Being self employed has its perks, but many people consider the tax side of it a negative part of the equation. The thing is, if you plan ahead working for yourself can be a lot of fun, even when you consider the fact that you have to pay all of your own taxes and it is done quarterly instead of yearly.
Paying your income tax when you are self employed is really simple if you simply plan ahead. You will pay quarterly, and you will need to estimate what your earnings will be for the upcoming quarter. This is usually not all that difficult, you can use your tax papers from the previous year, or you can over estimate what you have made in the previous quarter. A good tip is to over estimate by a couple hundred dollars. This will help to protect you from owing at the end of the year, and you may very well see a refund if you overpay.
Filing your quarterly online tax return is a really good idea because you will make short work for you self employment tax work. Online programs can walk you through all of the steps that you need to follow to be sure that you are entering accurate information that is not likely to be audited at the end of the year, which everyone wants to enjoy. Creating a very organized system and paying quarterly for your self owned business are the best tips that one can have.
No one wants to be audited or to pay more than they have to, and when you are organized you can avoid extra fees. If you don’t pay your taxes on time you will find it regrettable because you will end up owing and you can be charged for not following self employment tax laws. Organization will help keep you up to date and will help keep you on the good side of the IRS! If you keep an open mind and a positive attitude about your self employment you will find that it doesn’t have to be difficult and can actually be a very positive way to pay taxes. Tax services can help you stay organized, too!
Monday, March 24, 2008
Build Assets On Tax Planning
We spend our lives trying to build our assets for retirement, and passing something on to our kids and grandchildren. We plan on how to save on income taxes,but overlook our estates. Many of us don't even have wills or have them up to date. We have nothing in place to protect our estate from taxes, and this can be very costly to our loved ones. Some basic planning ahead can save thousands in tax dollars. People don't realize the federal estate tax rate is virtually double the income tax rate.
The Federal "death" tax is in flux, as to what's going on. Under the Economic Growth and Tax Relief Reconciliation Act of 2001, The tax is completely gone for the year 2010. But the estate tax will go right back into effect in 2011 if congress doesn't act to make it permanent. With the Democratic party the majority in Congress after the 2006 election, it's unlikely that the estate tax will be repealed, although changes to the exclusions and rates will probably take place. So we're most likely right back to facing the estate tax again, in one form or an other.
This has lead commentators to have some fun with our system. Tax gone in 2010 and back in 2011, Makes 2010 the best time to pass on if you have a large estate.
Your financial planning will change over the years,so it's something you need to stay on top of. There can be times when giving a "gift" would work out better. As a gift the asset would be subject to the capital gains tax,which is capped at 15% vs estate tax that can go as high as 47%.This is especially true if you have large holdings, that go over the tax excluded limit. Set at 2 million the next two years, but no one knows where it will be in 2011. Some suggest it will be set at 1 million.
To protect what you've worked so hard for,I suggest getting started on it right away,no matter what age your at now. It can start as a simple will and grow and change as your needs change. I would recommend reading up on the subject then seek out an estate attorney. Here I'd ask friends or someone that has had experience with this if they would have any recommendations. I would study up on the subject so I didn't go into it blindly.
I could only touch on the very basic parts of this tax. But I do want to emphasize the importance of getting an estate plan together,so as not to pay more than needed on Estate taxes,and a possible burden to loved ones. This should also take into account your state tax if it has one. Right now 24 states have an inheritance tax and more will likely follow.
The Federal "death" tax is in flux, as to what's going on. Under the Economic Growth and Tax Relief Reconciliation Act of 2001, The tax is completely gone for the year 2010. But the estate tax will go right back into effect in 2011 if congress doesn't act to make it permanent. With the Democratic party the majority in Congress after the 2006 election, it's unlikely that the estate tax will be repealed, although changes to the exclusions and rates will probably take place. So we're most likely right back to facing the estate tax again, in one form or an other.
This has lead commentators to have some fun with our system. Tax gone in 2010 and back in 2011, Makes 2010 the best time to pass on if you have a large estate.
Your financial planning will change over the years,so it's something you need to stay on top of. There can be times when giving a "gift" would work out better. As a gift the asset would be subject to the capital gains tax,which is capped at 15% vs estate tax that can go as high as 47%.This is especially true if you have large holdings, that go over the tax excluded limit. Set at 2 million the next two years, but no one knows where it will be in 2011. Some suggest it will be set at 1 million.
To protect what you've worked so hard for,I suggest getting started on it right away,no matter what age your at now. It can start as a simple will and grow and change as your needs change. I would recommend reading up on the subject then seek out an estate attorney. Here I'd ask friends or someone that has had experience with this if they would have any recommendations. I would study up on the subject so I didn't go into it blindly.
I could only touch on the very basic parts of this tax. But I do want to emphasize the importance of getting an estate plan together,so as not to pay more than needed on Estate taxes,and a possible burden to loved ones. This should also take into account your state tax if it has one. Right now 24 states have an inheritance tax and more will likely follow.
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