Accounting For The Self Employed Tax

The IRS website EFTPS is a great resource for the self-employed and small business owners

. It makes it much easier to pay the self-employed tax quickly and painlessly. You can use your online accounting tool to figure out how much you owe - Outright, for example, calculates the exact value for you - and then just enroll on EFTPS and pay with an online transfer; and that's just one of the features. However, recording that payment into the accounting software requires its own attention.

First, it's important to know that paying taxes is not a business expense. Tax preparation is, but the actual taxes you owe should be recorded as just that, estimated quarterly taxes. Most automated accounting services handle this smoothly. You just need to find the option to record a tax payment and that should be sorted. However, it's also important to recognize that this amount, although not present in a cash flow statement, does obviously impact profits and losses. And if you run a very small business, it also decrease the amount of money in your personal checking account.

Part of the reason you need to keep accurate records that indicate how much you paid, when, and with what method is to be ready for end of the year tax filing. You'll have to claim how much you already paid compared to how much you owe, as well as any deductions, in order to avoid making any mistakes. And if you do it correctly, you might even get a tax return.

One of the details that is most important for this process is any deductions that your accounting tool makes for each quality self-employed tax payment you make. For example, if you record some portion of your utilities bill as a business expense, say if you work online you factor in 25% of your internet bill, then most accounting tools will deduct these expenses from your income before calculating how much you own in taxes. If you don't realize that this is happened and attempt to claim those expenses again at the end of the year, you'll be making a mistake and the error could draw the IRS' ire.

Self-employed taxes certainly add another cost to running your own business. However, with the right preparation, accounting tools, and basic understanding of how to pay them, record them, and track them, you can minimize the burden and maximize your deductions.

by: John V

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