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Thinking of Becoming Self-Employed? 4 Things to Know for you Denver Taxes

March 11, 2016

Being your own boss has many benefits. Whether you want to start your own construction company or handle marketing for nearby business needs, being self-employed can be very rewarding. Self-employment has many responsibilities that come with it, including what to know for your Denver tax return.
 
  1. Forms Used: When choosing to make the transition and become your own employer, each year when you file your taxes, you will need to use a Schedule C or a Schedule C-EZ. There are slight differences between the two. The IRS explains the Schedule C-EZ can be used when you are the only employee. You would also use this form if your total expenses were $5000 or less, you used cash, did not carry an inventory or have a net loss, did not claim your house for business use and did not experience depreciation on items used. If you did not meet the requirements for a Schedule C-EZ, then you would use a Schedule C. A Denver tax specialist can help you gather the proper information for your forms.
  2. Taxes to Pay: When self-employed, you will need to pay taxes. The self-employment tax covers Social Security and Medicare with a Schedule SE form. It consists of 15.3%, which the IRS breaks down as 12.4% for social security and 2.9% Medicare. In order to pay these you will need a social security number and individual taxpayer identification number. Read more about these taxes from the IRS website.
  3. Deductions: Depending on the type of company you are running, being self-employed has tax break benefits. There are many deductions you can make if you use them for your work and have the documentation to prove them as expenses for your business. A home office is one of the first deductions self-employed individuals make. You are able to include a variety of things from mortgage interest to utilities within these deductions. Again, just be sure to have the documentation—which a Denver tax specialist can help with.  Your internet and phone bill is another deduction you can make, as well as traveling in a car or for the business, reading subscriptions and education. Check out these 10 tax deductions and benefits from Investopedia.
  4. Estimated Tax: As a self-employed individual, even though you will be submitting your tax return forms each year, you will need to pay your estimated taxes on a quarterly basis. To get started, you will need to find your net profit or net loss from your business. Paying estimated tax is necessary to cover Social Security and Medicare throughout the year. There are filing dates in April, June, September and January.

If you are ready to become self-employed, Bloch, Rothman & Associates can help. We are Denver’s leader in tax preparation and tax resolution services. You can rely on us to take care of the work so you can focus on your business and customers. We’ll be there every step of the way! Give us a call at 303-321-7160 or fill out this form to schedule a free consultation to get started!