Taxes And Home Business
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Although, as a home business owner, it is much easier to hide income than in a brick and mortar business, you are not exempt from taxes. You are subject to the same taxes as any other business. It’s easy to hide income when you are not receiving 1099s, as companies are only required to provide a 1099 when they pay you $650 or more in a year. If you are a freelancer who works for a variety of people you may not make that amount with just one client. It is advisable to operate your home business in an honest fashion to avoid any trouble with the IRS. If you are not receiving 1099s, that means you have to keep track of your own income and expenditures.

When you reach a certain income level in your business you are required to file Quarterly Tax Returns. You are also required to file state taxes and in some cases you must file other taxes that may include gross receipts, city and other municipalities and sales tax in most states if you retail products. You should retain the services of a tax accountant or advisor to be sure that you are filing all of the legally required tax forms.

If you had a 401K or an IRA when you were working an 8 to 5, you could roll that money over so that you don't have to pay taxes on the distribution. When you become self-employed, if you don't open your own retirement account, you’ll have no money when you’re ready to retire unless your spouse has Social Security income into which s/he pays.

As a sole business owner, you may be responsible for Social Security and Medicare taxes. You are not required by law to pay these if you don’t have employees, but if you want to use any of these services when you retire, you will need to make the contributions yourself, which include both the employer and employee percentage of the taxes. An alternative is simply to invest in an IRA.

Although businesses are more likely to be audited than individuals, it's in your best interest to have an attorney on retainer in case anything should happen to cause the IRS to contact you for an audit.

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