You have just set up your own business, and aside from the activities that need to be done to get everything up and running, you should also pay enough attention to the accounting side of your business.
The sooner you get this part organized, the sooner you will be able to concentrate on the business of making money.
The most difficult part about financial tax planning for new business owners is not knowing the terms, the rules, and the tax schedules. If you have no interest in this part of the business, then it would be better to hire a qualified and experienced accountant to set it up for you.
Of course, people with the credentials and experience will add an additional cost to your budget, but this is an expense well worth it.
On your own, you need to concentrate on the following areas as far as tax planning is concerned.
First, know what the rate for self-employed taxpayers are, as well as how the computations are done. In the United States, taxes that come from the self-employed are used mainly to cover for the Social Security and Medicare costs. This makes this a very serious income for the government.
If you are self-employed, there is a chance that you do not issue a paycheck to yourself. If this is the case, then you do not deduct any taxes from income earned on a regular basis. This tax can then grow to an amount that is harder to compute and pay. It would be a good idea to report your income on a monthly basis, and self-deduct, as well as pay the dues even if ahead of time. Make sure to keep a file of all payments made though, so that come tax season, you simply present proof of payment.
A business will have its own share of tax benefits which you should know about. For instance, your utilities, rental, luncheon business meals, even gas and transportation expenses can all be charged to the business. There is also the VAT input and output taxes, or sales tax on items purchased for the business. You just need to know the limit on how much you can charge to your business, and make sure to keep the official receipts on each expense you are charging to the business.
Another way to manage your taxes is to have a health care plan for the workers as well as for yourself. For the self-employed, you can get medical benefits for your entire family, provided the children are still dependents, and then you can deduct this expense up to 100%. Check to see what the requirements are for this benefit.
Tax planning is all about preparing early for that one month in a year when everyone is scrambling to fix their tax papers. If you plan and prepare ahead of time, you will never have to go through this kind of chaotic experience that is both harrowing and stressful.
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Self-employed taxpayers who use the cash method of accounting have the most flexibility to maneuver at year-end. See a tax specialist for more information.
Tax planning for the current year, if done properly, will set the course for your business in a way that is proper and full of direction. After all, a business is all about the bottom line.