Tax Implications of Being Self-Employed

If you are self-employed, tax season can be an immensely stressful time of the year. By this point, you have probably already filed your taxes, though if you filed for an extension you may be looking at those taxes right now. Being self-employed means that you are fully responsible for tracking your expenses, keeping your business on track, and setting aside enough income for taxes. You can do this on a monthly basis, but the reality is that most self-employed individuals end up having a large bill come tax season from a lack of taxed income from the year before. If you are self-employed and haven’t been withholding taxes over the year, you are going to need to have liquid cash to pay your tax bill. If you need cash today to bridge the gap, come into Tennessee Title Loan today to meet with one of our loan experts.

IRA

If you are self-employed and have no employees under your business name other than yourself, you can set up an individual 401 (k). As of 2018, individuals could contribute $18,500 plus an additional 25% of total net income to their individual 401 (k) retirement plans. If you have employees working under your brand we recommend that you start a SIMPLE (Savings Incentive Match Plan for Employees) IRA. Under a SIMPLE IRA plan, employees can contribute $12,500 of non-taxable income towards their retirement savings and employees over 50 can contribute an additional $3,000.

All of this money is then turned into non-taxable income and placed into your 401 (k) retirement savings account.  As a self-employed individual, you are solely responsible for all of your savings, so putting money aside on an annual basis towards your retirement is immensely important. Putting money towards your 401 (k) retirement plan will not only help you save money for the future but can cut your tax bill down immensely each year.

Home or Dwelling Write-offs

Most self-employed individuals start their business in their home and can write off home-related expenses on their taxes. It is immensely important for self-employed individuals who work from home to keep track of these home-related expenses themselves on a monthly basis, as you will need to report exact numbers directly to the IRS.

If your gross income exceeds your total expenses, you can deduct 100% of your business expenses. On the other hand, if your expenses exceed your gross income, you will still be able to make deductions up to the difference between your gross income and the sum of all expenses you would pay if the business was not in your home. The IRS also usually requires self-employed individuals to have an office that is solely used for work, so intend to keep track of expenses and make a record of all of the home office expenses incurred in the process.

With the end of tax season looming, if you are self-employed you are fast approaching your deadline for filing your taxes. Make sure that you have all the cash you need to come out on top of your taxes this year. Come into Tennessee Title Loan today to get the cash you need today.