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Q: What do I need to do differently if I\u2019m filing my taxes as a small business owner?<\/strong><\/p>\n\n\n\n A: <\/strong>Filing your taxes for the first time as a small business owner can be intimidating. While self-employed taxes are almost always a bit more complicated, there are a number of things you can do to make the process easier while saving money. This article explores the common mistakes small business owners make with their taxes and how to fix them.<\/p>\n\n\n\n The last few years have been an economic rollercoaster. The massive market shifts caused by the pandemic and the ensuing political and social changes mean many people\u2019s work statuses have changed.<\/p>\n\n\n\n One of the most common changes is a shift to self-employment. Small business formation boomed<\/a> during the pandemic, meaning there are tons of newly self-employed workers.<\/p>\n\n\n\n Self-employment can simplify life in many ways, adding flexibility and control to your work schedule. But when it comes to taxes, many find themselves frustrated and confused<\/a>.<\/p>\n\n\n\n Luckily there are a few handy small business tax tips you can learn to make tax season less scary. Here\u2019s how to save money and time when filing your taxes.<\/p>\n\n\n\n Working for yourself means operating as an independent financial entity. You gain the freedom to set your own hours and make money the way you want.<\/p>\n\n\n\n But with that freedom comes responsibility. You must learn how to:<\/p>\n\n\n\n This can be understandably overwhelming. Creating structure and stability without answering to anyone else requires new skills and attitudes.<\/p>\n\n\n\n The way you handle taxes is no exception. <\/p>\n\n\n\n When you work for someone else, your taxes are often automatically taken out of your paycheck. <\/p>\n\n\n\n In fact, you frequently overpay taxes when employed by a business or corporation. That\u2019s why you get a tax refund when you file your taxes.<\/p>\n\n\n\n Additionally, the amount of tax you owe is smaller when you\u2019re an employee. You\u2019re only liable for one half of the tax equation.<\/p>\n\n\n\n Income taxes can be broken into employer taxes and employee taxes. When you work for someone, your employer handles the employer taxes, meaning you only have to pay the employee tax rate.<\/p>\n\n\n\n But when you go into business for yourself, all that changes. <\/p>\n\n\n\n You\u2019re now responsible for the whole of your taxes, meaning you\u2019ll have to pay a higher proportion of your income to the government.<\/p>\n\n\n\n On top of that, your payments aren\u2019t going to include automatic tax withholding any longer. You\u2019ll have to set aside money for your taxes each time you receive payment.<\/p>\n\n\n\n These changes can be confusing, which is why the newly self-employed often make mistakes.<\/p>\n\n\n\n Many of the people looking for small business tax tips could benefit from simply filing on time.<\/p>\n\n\n People often forget to pay their taxes on time. When this happens, you wind up getting hit with late fees that make your taxes even more costly.<\/p>\n\n\n\n Don\u2019t wait. Even if you aren\u2019t perfectly sure how to properly file, reporting your income on time will save you from late fees.<\/p>\n\n\n\n Another issue the self-employed face is a lack of insight into their expenses.<\/p>\n\n\n\n It\u2019s easy to forget about the money you spend on your business, especially when it comes to minor expenses. <\/p>\n\n\n\n But those expenses can add up. A single client lunch might not be much, but if you do that every week, it can account for a significant write-off.<\/p>\n\n\n\n The final big mistake small business owners often make with their taxes is improper asset evaluation.<\/p>\n\n\n If you\u2019re self-employed, there\u2019s a good chance you have some personal assets that could count towards your tax deductions.<\/p>\n\n\n\n Your phone, laptop, and car can all count as business assets if you use them for work. <\/p>\n\n\n\n People often forget to include these when filing their taxes, leading to overpayment.<\/p>\n\n\n\n On the flip side, some people accidentally write off these mixed assets completely. If audited, this can result in fines and late fees, neither of which are good for your finances.<\/p>\n\n\n\n Luckily there are a few easy tips you can follow to ensure you don\u2019t face these issues.<\/p>\n\n\n\n Now that we\u2019ve explored how taxes impact small businesses<\/a>, let\u2019s move into a few tips you can use to make tax season a little easier.<\/p>\n\n\n The first and perhaps easiest tip is to get a separate bank account for your business. <\/a><\/p>\n\n\n\n A business account makes your taxes far easier to file, as all of your business expenses are collected and mapped out in one place.<\/p>\n\n\n\n Additionally, having a business account can help protect your personal finances. <\/p>\n\n\n\n If you pay taxes from a business account, an IRS audit will likely be confined to that account. This means your personal accounts won\u2019t fall under investigation.<\/p>\n\n\n\n Adding this bit of protection is generally a wise financial move.<\/p>\n\n\n\n As a small business owner or self-employed worker, your taxes will almost certainly be more complicated than a typical employee\u2019s.<\/p>\n\n\n\n This holds true whether you work for yourself full-time or you\u2019re just working on your side gig. <\/p>\n\n\n\n You\u2019ll likely have to file multiple 1099 forms<\/a> and perhaps include additional sources of income while filing. <\/p>\n\n\n\n On top of that, most self-employed have numerous, easy-to-miss business expenses you wouldn\u2019t think to include.<\/p>\n\n\n\n You\u2019ll want to get the right tax software to help organize your many different forms and sources of income. <\/p>\n\n\n\n More advanced tax software will also help you catch all the business expenses you might leave out, helping you maximize your deduction.<\/p>\n\n\n\n Finally, don\u2019t forget to account for your home office.<\/p>\n\n\n\n Did you buy a desk or a couch from which to work? Do you pay for WiFi so you can conduct your business? Do you use your laptop and phone for work-related activities?<\/p>\n\n\n\n Chances are, you answered \u201cyes\u201d to at least one of those questions. Don\u2019t forget those factors when filing!<\/p>\n\n\n\n Your home office doesn\u2019t even have to be a dedicated room. Wherever you work from, if you furnish it and pay to make it a viable workspace, you can include it in your tax write-offs.<\/p>\n\n\n\n One thing to note though: these assets probably aren\u2019t entirely work-related. <\/p>\n\n\n\n Your phone may make work calls, but you probably also use it to call friends or surf the web when you\u2019re off-duty.<\/p>\n\n\n\n To account for this, you need to file these expenses according to the percentage you use them for work.<\/p>\n\n\n\n So, if you use your phone for work 60% of the time, you can write off 60% of its value as a business expense.<\/p>\n\n\n\n Yes, business taxes are heavily affected by the state where your business is located. Each state has different tax laws, including:<\/p>\n\n\n\n If you\u2019re deciding where to register your business<\/a>, it’s worth considering these tax differences. Let me know if you need help comparing specific states!<\/p>\n\n\n\n Tax policies change<\/a>, and there are plenty of nuances within tax law that require an expert understanding to explain.<\/p>\n\n\n\n Luckily, you don\u2019t need to be an accountant to make self-employed tax filings easier and less expensive. Follow the tips above and you\u2019ll save time, money, and energy this tax season.<\/p>\n\n\n\n Further Reading:<\/strong><\/p>\n\n\n\n If you\u2019re thinking about launching your own small business, Alliance Virtual Offices is here to help. Our virtual office plans<\/a> provide you with a business address you can use to register your business, regardless of where you work from.<\/p>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nWhat Changes When You Work for Yourself? <\/h2>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nHow Self-Employed Taxes Differ from Regular Employment <\/h2>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nCommon Tax Mistakes of the Self-Employed <\/h2>\n\n\n\n
Not Filing On-Time <\/h3>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nNot Tracking Expenses <\/h3>\n\n\n\n
Not Properly Evaluating Assets<\/h3>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nSmall Business Tax Tips<\/h2>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nGet a Business Account <\/h3>\n\n\n\n
Use the Right Tax Software <\/h3>\n\n\n\n
Don\u2019t Forget About the Home Office<\/h3>\n\n\n\n
State where you business is registered<\/h2><\/div>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nConclusion <\/h2>\n\n\n\n
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