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People who have been employed in traditional work settings are finding it necessary to
supplement or replace their income streams. While some voluntarily leave their jobs others may
be the product of downsizing and layoffs. But many who retain a passion for their profession find
alternatives, such as outsourcing, to get back in the work force. It is important to stay abreast of
tax laws that impact self-employed persons. Here are three important tax considerations.
Tip #1 Reduce Taxable Income
When filing income taxes many self-employed business owners are surprised to find that they
could have lowered their taxable income and paid less in taxes during the year. It is important to
have a plan in place that includes tax reduction strategies. For example, one often missed tactic is
retirement savings. Contributing to a Self Employed Pension Plan is a great way to accumulate
non-taxable savings and keep more of the money you earn. Speak with a tax accountant to ensure
that you are maximizing benefits in this area.
Tip #2: Remit Estimated Tax Payments
Income tax withholdings are not taken out of payments that you receive as a freelancer. But just
because no tax is withheld does not mean that the government is not looking for you to send them
in. The top concern for most freelancers are how much to pay in estimated taxes and when to
send them in. To determine the amount of taxes due you will need to compute your gross income.
An income tax calculator and tax calendar are resources that help you estimate amounts and
make timely payments. Additionally, if state and local taxes apply, you will need to remit payments
to them as well.
Tip #3 File the Right Tax Forms
Freelancers can choose to operate as one of several business entities including Sole Proprietor,
Partnership, Limited Liability Company, "S" Corporation, or "C" Corporation. Each of these options
uses a different tax form for reporting purposes so make sure that you know which one to apply.
Working as a free-lancer has many benefits including flexibility and limitless income potential. At
the end of the day it is not how much you make that matters. It is how much you are able to
reinvest and multiply to create the lifestyle that you desire.
To learn more about tax requirements and strategies for freelance business owners, visit the
financial center at http://www.tbsusa.com. Check out the self-employment tax estimator and other
tax tools that will help you maximize the money you earn in business.
Copyright (c) 2010 Benita Tyler
TBS USA is committed to helping small business owners by providing proven financial
management strategies to help them achieve their profit goals, minimize tax liabilities, and build
wealth. Business advice and tax tips are available at http://www.tbsusa.com
Article Source:
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