Being self-employed can be great for a variety of reasons. However, it can also be very hard on your taxes. If you are not careful you can get hit pretty hard on your taxes, which is why it is important to do a couple things that can help you to pay less on your taxes and keep more money in your pocket.Here are a couple suggestions:
1. Pay Your Health Care Out Of The Company
Usually when you are self-employed you will have to find private insurance. Once you find your private insurance coverage then you should start having the company pay it. If you pay it privately, there will be a smaller write off or deduction for it. However, if the company pays your health insurance than you would qualify for some extra deductions.
Thus, you put the insurance policy in your name, but you have the company actually pay the premium each month. This doesn't mean that the company has to front the bill; instead you just have them take it out of your wages.
So if you have a partner in your company, each of you would calculate how much your premium is and then you have the company pay the bill, then subtract it from your paycheck. This will help you come tax season.
2. Collect More Dividends
If you own stake in the company then you can collect both wages and dividends. Wages are taxed more than dividends are. This means that instead of paying yourself everything in wages you should do some wages and some dividends.
You can't do all of your income in dividends, this would be considered tax fraud. But you can do a good percentage for example somewhere under half can be dividends and the other half are wages.
3. Know Your Deductions
When you are self-employed you can write off almost anything. This means that the amount that you will be taxed is lower. So if you use your computer at home, calculate the depreciation of the computer, if you have an office, drive back and forth, paid for lunches with clients and so much more, you can write it off. One of the best things you can do is talk to an accountant about all the deductions that you can take. This will help to save you a lot of money when it comes to taxes.
These are a couple ways that you can save money on your taxes when you are self-employed. To learn more, contact a company like The Callen Accounting Group, PLLC with any questions or concerns you have.Share