Magazine article Black Enterprise

The Top 10 Tax Issues to Consider When Your Job Status Changes: If the Economy Has Forced You into Self-Employment, Sole Proprietorship, or Freelance Consulting, Here's a Guide to Help You Manage Your New Tax Obligations

Magazine article Black Enterprise

The Top 10 Tax Issues to Consider When Your Job Status Changes: If the Economy Has Forced You into Self-Employment, Sole Proprietorship, or Freelance Consulting, Here's a Guide to Help You Manage Your New Tax Obligations

Article excerpt

MANY WORKERS HAVE BEEN PUSHED into self-employment and freelance work this year. A leap into entrepreneurship presents a new set of tax rules.

Here are 10 key tax issues to address in the first year of striking out on your own.

1 Find a CPA or tax accountant who has clients in your line of business.

Accountants can offer far more than tax preparation services. Often, they share the best practices of other businesses they work with, say tax experts Thomas Ochsenschlager and Abraham Schneier of the American Institute of Certified Public Accountants. A bonus: They can provide leads to new clients.

2 Decide how you want to incorporate.

Choose one of the following designations: sole proprietorship, partnership, corporation, S corporation, or limited liability company. Go to www.sba. gov/smallbusinessplanner and click on "Choose a Structure." Your choice determines how you set up record keeping and prepare annual taxes.

3 Set up a record-keeping system and accounting method.

There are dozens of bookkeeping software packages for small businesses. Choose one, and have your accountant walk you through the initial steps. Host programs will also generate the financial statements you'll need to present to potential investors, bankers, and business partners.

4 Don't forget about your self-employment tax, estimated tax, and other business taxes.

When you were an employee, you paid half of your Social Security and Medicare tax, or 7.65%, while your employer paid the other half. Now that you are self-employed, you're responsible for the entire 15.3%.

[ILLUSTRATION OMITTED]

5 Create a daily record-keeping system.

The Internal Revenue Service frowns on business owners who try to recreate expense records long after the expenses were incurred. Get in the habit of keeping a daily log of all your spending. During the first couple of years in business, you'll rack up many miscellaneous expenses--mileage, business lunches, and office supplies. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.