Going from having a job to being self-employed is a big step. Being self-employed can be both rewarding and very stressful. People make a lot of mistakes like not keeping track of deductions, not keeping track of certain information, and not putting enough back for taxes. You can go to sources like “My Money House” for information on what to keep track of and how to organize it. Below is a list of things that can help the newly self-employed person avoid a lot of mistakes.
Know what taxes apply to you
This is where people make the most mistakes during their first year as a self-employed person and these mistakes can add up. A good practice to follow is to do your research on how you taxed and not assume that it will be the same as before. For example, in Australia, there is a difference in how a company is taxed and how a sole trader is taxed.
Look up this information and plan accordingly. The same goes for someone in the United States or anywhere else. The self-employed are typically taxed differently than people who have jobs. The next thing to look out for is keeping track of deductions.
Deductions are a big deal for anyone. Most people have simple deductions that don’t require a lot of planning. For the self-employed, this is a different story. Deductions, in this case, can be everything from monthly electric bills, the price of software, and even the space that’s used as an office. It would be a good idea to keep track of information like this when tax time comes so everything goes smoothly when you file.
These records can be kept electronically and are a good way of having quick access if you decide to go with a tax professional. Working with receipts in an electronic form is going to speed up the process when tax time comes. It can be very surprising to how much a self-employed person can deduct if they keep track of it. This can be a few hundred or even a few thousand dollars a year.
How much should you put back?
This is a simple mistake that people make. For example, the Australian government offers multiple ways that a person can pay their taxes. This is great because the self-employed can plan out how much they owe and stay on top of things. Falling behind is never a good idea.
Starting your own business and working for yourself can be very rewarding. Making mistakes is common and some mistakes can make the first year of business very difficult. Keeping track of your deductions and knowing your tax rate can save you a lot of time. Places like “My Money House” offer a good start for gathering information on things you should be keeping track of. If these steps are followed, then it can help make that first year great.