Taxes and the Home BusinessCopyright © Roderick Eash
http://www.TheEashSyndicate.comJust because you work at home does not mean you are not subject to the same taxes as
any other business venture. The difference is that because you do work at home, it's much
easier to hide the income than that of a brick and mortar business. On the other hand, the
time will come that you will be caught if you don't operate your business on the level.
What makes it so easy is that companies are not required to provide a 1099 unless they
pay you at least $650 in a year, and if you are a freelancer who works for a variety of
people, you may not make that amount with just one client. .
If no one is sending a 1099, that means you have to keep track of your own income as
well as expenses. There is a certain income level where you are required to file a
Quarterly Tax Return, so you want to make sure that you make yourself aware of that so
that you don't incur a penalty for not filing it. You also have to file your state taxes as
well based upon your state of residency. Other taxes that may be involved include gross
receipts taxes, local taxes (city and other municipalities), and sales tax in most states (if
you are selling products) just to name a few. It is advisable to enlist the services of a tax
accountant or tax advisor in order to be certain that you are filing all of the tax forms that
you are legally required to file.
Other taxes you may have to pay yourself as a sole business owner includes Social
Security and Medicare taxes. Although you are not required by law to pay these since you
don't have employees, if you desire to make use of these services when you retire, you
will need to make the contributions yourself. That means you will need to pay both the
employer and employee percentage of the taxes. You can, however, choose to simply
invest in an IRA Plan. If you had a 401K or an IRA when you were working, you can
take the money and roll it over so that you don't have to pay taxes on the distribution.
Since you are now self-employed, if you don't open your own retirement account, you
will have nothing when you are ready to retire unless your spouse has Social Security
income into which he or she pays. You may also want to have a tax attorney on retainer
in case anything should happen with your taxes and you find the IRS calling you for an
audit. Businesses are more likely than individuals to be audited, and it's in your best
interest to have an attorney with you.
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