Pay Less Tax By Legally Reducing Taxable Income
Many self-employed persons are surprised to find that they can reduce their taxes by lowering the income they will be taxed on. You can do this by following a tax reduction plan the entire year. One strategy that entrepreneurs often miss is saving for retirement. When you contribute to a retirement account like a Self Employed Pension Plan, for example, you not only pay less tax, but build tax free savings.
Estimate Taxes Ahead of The Deadline
When you work as an independent contractor instead of an employee there is no tax withheld. That does not mean that you are not required to send in what you owe. A top concern for many entrepreneurs is how much taxes they will have to pay. You can figure this out by keeping a good record of sales and then computing your gross income. A handy tool that can help with this is an income tax calculator. When you have the estimated amount, be sure to send them in. Paying on time helps you save money by not having to pay late filing fees.
File the Right Forms
When you file a business tax return you will need to complete the forms. The one that you do will depend on your company’s legal structure. For example, if you are setup as a sole proprietor then you will need to file a Schedule C to report business income. Other forms, including Partnerships, “S” Corporations and “C” Corporations have their own forms, as well.
Being self-employed has many benefits including earning as much as you’d like. What matters overall is not how much sales you bring in but how much you get to keep.
Do you use tax reduction strategies to maximize your profits? Share your time proven tips in the comments below.