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Taxes and the Independent Business
Many people dream of the freedom offered by working from home, but they don’t always realize the work that must go into that endeavor before you can get your company off the ground. While there are practically innumerable tips for starting a business, one of the most commonly overseen problems is the issue of taxes. Before you start your own business, take into account that come April 15th, things are going to be a bit more complicated for you.
The biggest problems occur when it comes to withholding. When you get a standard paycheck, money is almost always withheld from social security and the federal government. But when you receive paychecks as a contractor, money is not actually withheld. Rather, you get a 1099 form at the end of the year, and you’re expected to pay self employment tax in one lump sum. This can be quite a shock for people that don’t expect this payment. So be prepared this tax season by setting aside roughly 15% of what you made. Drop it into a separate account, and you’ll be ready to cut the check to the IRS when the time comes.