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Tax Tips - Save on Taxes

Self-Employed Individuals

Self-employed individuals who work in the building trades, as consultants, instructors or real estate professionals, are usually compensated for their work as contractors rather than as employees. This means that no Federal income, Social Security or Medicare taxes, or State income taxes, are withheld from their compensation.

Each business or individual for whom you work should ask you to provide a completed Form W-9. You can obtain a blank Form W-9 here: https://www.irs.gov/pub/irs-pdf/fw9.pdf. Once you’ve filled in and signed your Form W-9, you can provide a copy of the same completed Form W-9 to each business or individual for whom you work.

Estimated Tax Payments

Self-employed individuals should make estimated income tax payments on the net business income they earn quarterly. Otherwise, they may receive huge, unexpected income tax bills when their income tax returns are filed the following April.

Calculate Your Net Income

  1. Income
    Add all of the income (i.e., cash, checks, credit card payments, etc.) that you received during the quarter.

  2. Expenses
    Add all of the business expenses that you incurred during the quarter. You may ignore your vehicle mileage and Depreciation expense for now.

  3. Net Income or (Loss)
    Subtract your Expenses from your Income; the result is your Net Income. If the result is a negative number (i.e., a “Loss”), you can stop here; you won’t need to make any Estimated Tax Payments for this quarter.

Please refer to the Sidebar Estimated Tax Payments.

 

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