Sole Proprietorship Taxes Explained

welcome back to our channel Claire value tax my name is Brian Kim I'm a certified public accountants and today we're going to be talking about taxes for the self-employed people this video is perfect for other people who are new to this or they're just completely lost they don't know what to do well we're gonna tell you exactly what we what you need to do we're gonna make this video really quick it's not gonna go over your head if you want more information you can go to our website in the link below so we're gonna go over four key points and we're gonna we're gonna just fly right through this and it's gonna be quick and painless so what are those four things those four things are one who is a self-employed person what do you need to do how do you report your taxes and what are some tips okay so the first one who is who the heck is a self-employed person basically you know you're not an employee that's all that it is so you're a self-employed person you're typically in the independent contractor a business owner or you're just doing your own thing basically you're not an employee so you know forget these classifications forget this technical jargon what's the difference the difference is that nobody's holding taxes from your paychecks basically you even have a paycheck so that's the difference nobody's taking taxes withholding taxes from you every pay period that's the biggest difference okay so this is this ties in to my second points what do you need to do as a self-employed person you need to do two things first thing make sure you have enough money to cover your taxes you know I see so many people getting in trouble because they forget that nobody's holding taxes from each payment they receive so at the end of the year when they go to do their taxes they have a surprise tax bill even though they should have seen it coming because as an employee you know you have taxes taken out of your paycheck every paycheck federal taxes Social Security Medicare of state here you're self-employed person nobody's doing that for you so you got to make sure that you have enough money set aside to cover your taxes you know that's your responsibility as a self-employed person okay number two of what do you need to do you need to make sure that you're reporting your taxes correctly you're a self-employed person you know this ties in with my point number three that we're gonna cover so point number three how do you report your taxes an employee receives a w-2 and then they put this in taxable wages on their individual income tax return here you're not an employee you're not getting the W - you're a self-employed person you're either getting a 1099 misc you're getting a 1099 K or you're getting nothing yeah that's a self-employed person so if you get one of those or you don't get any of those you're reporting your income on your individual income tax return the 1040 you're reporting it on Schedule C that's where it goes your self-employment income Schedule C okay what are some tips this is the last point C we're we're almost almost done what are some tips your income goes on Schedule C of your tax return but so do your deductions do not forget your deductions because deductions that's what's saving you money so any expense any expense or your expenses related to your self-employment activity you know if if they're related use them as deductions because deductions they're gonna reduce your taxable income and it's ultimately saving you money so don't forget your deductions deductions go on Schedule C along with your income then they net together and you pay taxes on your profits okay if you need help with your deductions if you want more information about actual deductions you know we have another video for that you can also visit our websites so our tip number two is regarding estimated tax payments so again this circling back to our our previous comments about setting aside money for taxes if you have the money readily available send them in as estimated tax payments because okay if you are just setting aside your money you're like okay I made all this money you know throughout the course a year I know I'm gonna have a big tax bill at the end of the year you know I'm expecting it rather than just expecting it and then just paying that lump sum at the end of the year when you're doing your tax return send them in throughout the course of the year as estimated tax payments why it's because you'll save money on interest in penalties if you don't do estimated tax payments most likely you're gonna get charged interest in penalties so you know rather than just saying oh I'm gonna set this money aside in a separate checking account or I'm gonna stick it under my mattress cuz I'm gonna expect a big tax bill I'm gonna just label it tax money no no it's better to just send it in during the year as estimated tax payments save yourself some money on interest on penalties because that's what the IRS wants the IRS wants you to send an estimated tax payments throughout the course of the year as you earn your income okay so if again if you want more information check our website out if you found this helpful please give us a thumbs up if you know someone who's lost about the situation and they need help you know please share this with them and please subscribe since we're answering questions from our subscribers thank you so much for tuning in we look forward to making more videos hope you find this helpful take care

Channel: ClearValue Tax

Views: 120,875

Keywords: self employed taxes for dummies, self employed taxes, self employment taxes, self employed tax, self employed sole proprietor, self employed tax return, self employed tax deductions, self employed tax write offs, self employed tax tips, self employed taxes 2019, tax write offs, business owner, tax write offs for the self employed, estimated tax payments, quarterly tax payments, IRS, Schedule C, sole proprietorship taxes, sole proprietorship, sole proprietorship taxes explained

Id: P0asLGSBQoM

Length: 6min 11sec (371 seconds)

Published: Mon Jul 08 2019