If you're self-employed, you're solely responsible for your own financial stability. Because of that responsibility, it's crucial that you make sound business decisions. One of those decisions involves your business taxes. After all, even a small mistake can come back to cause you serious problems later on. Here are four crucial steps you need to take to avoid tax problems for yourself.
1. Hire a Tax Service
When you're self-employed, one of the best financial choices you can make is to hire a tax service. A tax service will take care of all the details involved in the preparation of your taxes. However, they'll also take care of other issues that you might not have thought about. For instance, they'll help you find all the deductions that might apply to your business. They'll also understand all the current laws as they relate to your tax needs. As an added benefit, the fees you pay to your tax service provider can be deducted from your taxes.
2. Don't Lose Your Receipts
If you're self-employed, you can't afford to lose any of your receipts, especially those that relate to your home office. If you plan to claim your home office as a deduction on your taxes, you'll need to provide documentation for all your expenses. The best way to do that is with your receipts. Remember to keep receipts for things like printer paper, ink cartridges, and office equipment.
3. Document Cash Payments
If you accept cash payments for your services, you'll still need claim that income on your taxes. Failing to claim your cash payments could put you at risk for tax penalties and fines, especially if your expenses seem to outweigh the income that you've reported. When claiming cash payments, be sure you can document each transaction. To document your cash payments, keep a record of each transaction. The documentation should include the amount of the cash payment, the purpose of the payment, and the date each transaction occurred.
4. Invest in Your Retirement
If you're self-employed, you'll need to take steps to provide for your future retirement. One way to do that is to invest in a secured retirement account. When you invest in an IRA, you'll receive a couple of benefits. First, you'll be ensuring a secure retirement for yourself. Second, the money that you invest can be used as a tax deduction.
Don't take chances with your financial stability. If you're self-employed, use the tips provided here to avoid mistakes with your taxes. For more information, contact a tax professional like Jeffrey Beebe CPA.