{"id":17936,"date":"2019-03-13T07:35:44","date_gmt":"2019-03-13T11:35:44","guid":{"rendered":"https:\/\/honeybook.site.strattic.io\/?p=17936"},"modified":"2023-08-25T14:25:29","modified_gmt":"2023-08-25T21:25:29","slug":"six-pitfalls-avoid-self-employed-taxes","status":"publish","type":"post","link":"https:\/\/hbb.dev.reliablepenguin.com\/blog\/six-pitfalls-avoid-self-employed-taxes","title":{"rendered":"Top 6 Pitfalls to Avoid for Self-Employed Taxes"},"content":{"rendered":"\n
\"self-employed<\/figure>\n\n\n\n

It\u2019s that time of year: we\u2019re officially in the middle of tax season. For the eager few, you may have already received your refund, but for many others, you\u2019re already thinking about filing an extension for your self-employed taxes.<\/p>\n\n\n\n

If you\u2019re in the latter group, fear not. We\u2019ve helped hundreds of small business owners file their taxes and have seen it all. Our best advice for the self-employed? Be sure to avoid these six common tax mistakes to help you save on self-employed taxes<\/a>, penalties, and time\u2014especially if you\u2019re audited.<\/p>\n\n\n\n

1.    Not paying estimates<\/h2>\n\n\n\n

\u201cHow much will I get back?\u201d is a common question I get from clients. If they had withholding on a W2 or made estimates throughout the year, this is a valid question. If they had income and no withholding and made no estimates, then a more likely question is \u201cDid I set enough aside to cover my taxes?\u201d<\/p>\n\n\n\n

So what are tax estimates? If you\u2019re self-employed, you generally need to make estimated tax payments. And it\u2019s important to be aware of the quarterly income tax estimates you should make for both federal and\u2014for most of you\u2014state income tax. These are generally due April, June, September, and January 15th<\/sup>. The idea is to pay about a quarter of the taxes you owe based on last year\u2019s net income on a quarterly basis to avoid penalties.<\/p>\n\n\n\n

Check your 1040-ES<\/a> on your prior year return for your federal income tax estimate\u2014it may even already have the numbers filled out. However, if you made less than last year, you may want to work with a pro to calculate a lower estimate. If you made more, you\u2019ll want to be sure to avoid #2.<\/p>\n\n\n\t\t

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\n\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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\n\t\t\tDownload the small business tax filing checklist\n<\/span>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Check out the checklist so you can refer to it as you prepare for this tax season.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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\n\t\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\tGet the checklist<\/span>\n\t\t\t\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\n\n\n\n

2.    Not setting aside 30% of your net income<\/h2>\n\n\n\n

A good rule of thumb is to set aside 30% of your net income for income taxes, including self-employment tax. If you live in a state like New York or California, that number may be closer to 40%. Even if you\u2019re making your estimates by using the vouchers and instructions from last year\u2019s filing, you may still owe more if your situation changed or you made more money this year. An excellent best practice is to look at your monthly net income (revenue minus expenses) and multiply by 30%. Put that in your separate tax savings account, and hold on to it until you file your taxes.<\/p>\n\n\n\n