Ep. 054: Understanding Taxes as an Entrepreneur
As much as you might like to avoid it, or stick your head in a hole, taxes are inevitable, and a really important piece of business ownership. We are excited to have Melissa Whaley on with us this week to talk about taxes, but we promise it'll be fun!
Melissa is a licensed tax pro and has been in the tax environment since 2009. Her mission is to help empower women with an understanding of their finances so they can feel more in control of their money and their business growth.
END OF YEAR TAX INFORMATION:
- It's less stressful to have your taxes done prior to the April deadline.
- Even if you haven't been tracking your finances, just start.
- If you are trying to save on taxes by spending at the end of the year, don't waste your money. Make wise investments by depositing money into an IRA or purchasing much-needed equipment that will actually grow your business.
- Audit your recurring expenses and determine if you really need to continue paying for them.
ADULTING WITH YOUR MONEY:
- Set up an IRA and pay into regularly. As a self-employed person, you won't have a 401K, but there are tons of IRA, or individual retirement accounts, for those who are self-employed.
- When you hire someone to do work for your business, you need to document how much you pay them, and may need to provide them with a 1099. You will need a W-9 from them, in most cases, in order to document anyone you pay more than $600 for the year.
- If you pay with a credit card, you don't have to send them a 1099 because the credit card processor will do that for you.
- 1099 MISC: Document all of your income that is not attached to a paycheck (if you are paid as a contractor)
- 1099K: This will come from Stripe, PayPal, Wave, etc. from credit cards with their fees.
- Hire a CPA and have a business account.
- Create a business budget, pay yourself, save money, pay your taxes, and be responsible with your money.
PREPARING FOR SELF-EMPLOYMENT TAX:
- When you work for an employer, the employer takes income taxes, social security, and Medicare out of your check before you receive the money.
- When you are self-employed, you pay both income taxes and self-employment taxes.
- Income taxes will vary based on your household income and can be up to 40%
- Self-employment taxes is 15% of your businessprofit each year