According to a recent study released by the Internal Revenue Service, the self employment industry has grown exponentially over the past six years - more so than any other employment segment.
But unlike salaried wage earners that receive paychecks every week with their taxes automatically taken out, those who are self-employed do not have any third-party working to collect their state and federal taxes on their behalf. Thus, they’ll need to pay their taxes quarterly throughout the year. For this reason, it's very important for a self-employed person to plan accordingly. This will also help ensure they don’t have to pay additional fees or penalties for underpaying taxes.
Fusion CPA works with a wide variety of self-employed individuals to not only help them accurately estimate what they will need to pay when they file, but also to help determine the best way to make their payments from a cash flow perspective. The unique needs of the business, along with the amount of revenue generated on a monthly basis will usually dictate how money is set aside for quarterly taxes.
Depending on your particular situation, you may want to overpay quarterly so that you can get a nice chunk of money back at the end of the year. Or, you might prefer to underpay so that you can utilize your money throughout the year knowing that you will owe money when it comes time to file. We’ve found that most often, business owners prefer to determine exactly what is owed each quarter and pay that exact amount.
When tax planning, self-employed professionals will also want to take the following into consideration: retirement planning, entity selection and strategic reinvestments. Stay tuned for upcoming blog posts where we explore each of these considerations in more detail.
If you're self-employed and would like to learn more about how Fusion CPA can help with your tex planning needs, please contact us today for a free consultation.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided in this website is not all inclusive and such information should not be relied upon as being all inclusive.