Deciding to become self-employed takes a great deal of courage and bravery, there are so many advantages to working for yourself versus working for someone else. Apart from setting your own hours, you have more free time to spend with the family. When you decide to pursue the self-employed route, you should consider registering as a business. This will reduce your self-employment tax. You will also lessen your tax obligations.
What is self-employment tax?
Self-Employment tax per-requisite amount that is required by law to be paid for Medicare programs and social security funds. When you are employed by an employer, the employer will make a small contribution on your behalf, when you work for yourself, you are liable for the entire amount.
You can claim a tax deductible in terms of your self-employment earnings. When you earn over $400, you can file your tax return. You can deduct a portion of your tax amount owing and therefore make an adjustment to your income.
There are more benefits to registering a corporation or a company, this will reduce your tax liability. With a sole proprietorship, if you earn a net profit in a fiscal year, you will be liable for the entire amount.
You can reduce your net profit by making tax deductible on your business expenses, if you operate your business from home, you can deduct many related expenses such as office space, a portion of the mortgage and office supplies.
There are more benefits to registering a business than working as a sole-proprietor. Try to establish all the possible tax deductions that you can utilize to ensure that your tax bill is greatly reduced.