The fact that you are getting a 1099-MISC to report your earnings to the IRS means you are in business for yourself. You need to take full responsibility and treat your business as a business—and do the normal things a business does when filing taxes.
Here are a few ways you can start acting like a business and mitigate issues with the IRS.
1. Stop giving out your Social Security number and get an Employer ID (EIN) number. This accomplishes two things: It protects you from identity theft, and it shows the IRS that you are a business.
2. Open a business bank account, using your new EIN, to separate your personal finances from your business finances.
3. Keep books. If you don’t know how to keep your books, it’s time to either learn or hire a competent bookkeeper.
4. Select accounting software that’s appropriate for your business—don’t just use something that doesn’t really meet your needs just because it’s free. These days, there are sophisticated choices that can not only track your bookkeeping needs but also help you create a business website.
5. Do some tax planning. Read a book on small business taxes to learn how about tax benefits available to business owners of all kinds.
6. Pay your estimated taxes. After you have the numbers and know what they mean, and once you have reduced your profits by taking advantage of tax planning, you can determine your quarterly profits
Even if your overall taxable income is a loss, you may owe taxes because your Schedule C had a profit. You’ll be paying 15.3 percent as self-employment taxes (Social Security and Medicare) on those profits.
Courtesy of Equifax
For more information contact Neikirk, Mahoney and Smith at 502-896-2999
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