Tax Tips for Self-Employed Entrepreneurs

Owning your own business certainly has its perks – you get to be your own boss, you get to pursue your passion, and you get to have the final say in how the business operates. One of the downsides of owning your own business is navigating the complicated tax code when filing as a self-employed entrepreneur. As a self-employed small business owner, the very last thing you want to worry about is filing returns and paying quarterly tax estimates. Use these tax tips for self-employed entrepreneurs to make sure you are making the most of your available deductions and staying on top of your tax obligations:

Tax Tips for Self-Employed Entrepreneurs

1. You’re Responsible for Quarterly Taxes – Unlike standard W-2 employees, as a self-employed business owner, you will not have your taxes deducted from your paycheck. Instead, you will be responsible for paying estimated quarterly taxes throughout the year. The annual quarterly self-employed due dates are April 15, June 15, September 15, and January 15, using the IRS Form 1040-ES.

2. Note a Hobby Designation – The IRS makes a clear distinction between a hobby and a business, using a variety of factors to determine which yours may be. Either way, you must claim the income, be it from a business or hobby. But note that there are different allowed expenditures and deductions for each. Click here to learn more about which category your operation may fall under and how to properly file taxes for each.

3. Business Expenses – Per the new Tax Cuts and Jobs Act (TCJA), businesses can now increase the amount they expense under Section 179 from $510,000 to $1,000,000 for business-related equipment purchases that will depreciate over time, including property, computers, furniture, and the like. There are limits placed on the amount of expenses any one business can take, depending on income generated by said business.

4. Mileage and Vehicle Depreciation – Similarly, under the TCJA, self-employed business owners can take an increased deduction for car depreciation on vehicles owned by the company and used for company purposes. If your business owns a car used for business purposes or is weighing the options between leasing versus buying, note this change as you plan for taxes. Furthermore, as you drive said car for business purposes, there are standard mileage deductions you can take to account for the cost of fuel and wear and tear. Learn more about mileage deductions here.  

5. Deductions for Meals and Entertainment – As we’ve discussed on our blog before, under the new TCJA, there are also changes to how you can deduct the expense of meals and entertainment costs as a self-employed small business owner. Review the changes on the Tally Services blog here.
   

As a self-employed business owner, it can be enough to worry about running your business and growing your customer base. You don’t have to worry about navigating self-employment taxes or memorizing our ever-changing tax code – Tally Services is here to help! We’ll make sure your small business is properly set up to reduce liability and make sure your tax filings are up to date and accurate. Contact us to learn more about our bookkeeping and accounting services for businesses of all sizes in Northern Colorado.