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5 Ways To Make Your Self-Employed Taxes Easier Next Year

Big changes start small. Here are achievable things you can do today to streamline your next tax season.
Accounting and TaxesMay 04, 2023

Tax day has come and gone, bringing relief to self-employed folks who filed their taxes on time. But, as any small business owner knows, tax season is not just a once-a-year event. It's a year-round responsibility that requires planning and organization. To make self-employed taxes less of a pain next year, here are five tips to take control of your finances.

Separate your business and personal accounts

Picture this: you’re sitting at your desk, surrounded by a mountain of receipts and invoices. You’re trying to sort through them all to figure out which ones are business expenses and which ones are personal expenses. Sound familiar? It’s a headache. The good news is that separating your business and personal expenses into different accounts can basically eliminate this problem.

A business bank account is key to streamlining your self-employed taxes and finances. With a separate business account, tracking your business expenses becomes a breeze. No more sifting through months of transactions and trying to remember whether there was a business reason for that expensive Italian dinner back in August. Simply run down the list of transactions in your business account and voila! You’ve got all of your business expenses in one neat and tidy place.

Having a separate business account also makes tax time easier. No more scrambling to figure out which expenses you can write off as tax deductions. With everything separated, you can calculate your business expenses and deductions quickly. And in the event of an audit, you’ll have all the documentation you need to prove your business expenses.

Using a small business bank account helps in a number of ways: 

  • Keeps your business and personal expenses separate

  • Makes expense tracking easier 

  • Simplifies tax calculations

  • Helps you calculate your revenue and profit

You might be thinking, “Great, I’ll open a business account. Just don’t make me stand in line at the bank to do it.” We hear you. Fortunately, there are plenty of online small business bank accounts that you can sign up for in just a few minutes. Better yet, some of them come with a range of financial features like invoicing or bookkeeping tools to make your life even easier. Many small business bank accounts are free to sign up, making it a no-brainer for simplifying your self-employed taxes and bookkeeping needs. 

Keep accurate records

Now that you’ve set up that separate business bank account, record-keeping becomes much simpler. And accurate business records can help make tax preparation go smoothly.

When it comes to self-employed expense reporting, keeping digital records is almost always the way to go. It’s easier to verify your numbers when handwriting is taken out of the equation, it’s easier to access on-the-go and enter into software, and digital records mean you won’t have to dig for receipts in your pants pockets.

Photographer and small business owner Amber Garrett used to dread the weeks leading up to tax season, because she’d spend an entire week categorizing a year’s worth of expenses before taxes were due. That’s a week of her life that she’ll never get back.

But don’t worry: You don’t have to spend a whole week on your bookkeeping tasks. Try breaking it up into small chunks. Block off time on your calendar each Friday to categorize your week’s expenses and make sure you’ve saved the receipts or documentation. This way, you won’t have to spend hours sifting through a year’s worth of receipts at once.

Stay on top of tax deadlines

Think tax day is the only important day when it comes to your taxes? Think again! When you’re self-employed, you’re responsible for paying quarterly estimated taxes throughout the year.

Other taxpayers typically don’t have to pay quarterly taxes, but it’s different for self-employed folks because you’re your own employer. And when taxes aren’t withheld from your paycheck, you’ll need to make your tax payments each quarter on your own. It can be a daunting task but it’s often crucial to avoid penalties or fines.

Missing these important tax deadlines can cause unnecessary stress during tax season, not to mention lead to costly penalties and interest charges. And as a self-employed individual, you work hard for your money, so there’s no need to hand over more of it to the IRS than is absolutely necessary.

For estimated tax purposes, a year has four payment periods, and taxpayers must make a payment each quarter. Here is the traditional schedule:

  • April 15: First quarter estimated tax payment due

  • June 15: Second quarter estimated tax payment due

  • September 15: Third quarter estimated tax payment due

  • January 15 of the following year: Fourth quarter estimated tax payment due

Note: If these dates fall on a weekend or holiday, as they do in the 2023 calendar year, the due date is the next business day. 

Tip: Open your calendar or scheduling app and put these dates as recurring on your calendar. Set reminders so you can be sure you won’t miss them. 

Save for taxes as you go

Now that you have those quarterly estimated tax due dates on your calendar, the next step is making sure you have money to pay them when the due dates roll around. Typically, the best way to save for tax payments is to save money as you go.

As a self-employed individual, you’re generally responsible for paying both the employer and employee portion of Social Security, Medicare, and income taxes. That’s a lot to keep track of, we know. But here’s a general rule of thumb: save 25-30% of your income for taxes. Remember that the actual percentage you'll need to save will vary depending on your income level, deductions, and other factors.

And let’s be real, as a self-employed individual, your income may not always be predictable. That’s why it’s important to set a goal for how much you want to save each month or based on each source of income. Make it a habit to transfer that amount to a separate savings account. Saving money can be tough, but trust us, it’s worth it in the long run.

If you use Found, we'll calculate how much you owe and automatically set aside money into a separate tax savings account each time you get paid.

Tax season already feels stressful enough. Don’t add to your worries by digging through the proverbial couch cushions to find money. It's often better to err on the side of caution and save more than you think you'll need, rather than underestimating and facing a hefty tax bill come tax season. When you know you have the money to pay those tax bills, hitting “pay” will sting a little less.

Know when to ask for help

As a self-employed individual, you're not just the boss, but also the accountant, marketer, administrator, and more. You're responsible for juggling multiple roles and keeping all the balls in the air. No pressure, right? But here’s the truth: Trying to do everything on your own may be more work than it’s worth.

Recognizing when to ask for help is crucial for self-employed individuals. Outsourcing certain tasks to professionals or 1099 contractors can help you save time and energy, allowing you to focus on growing your business and generating income. 

One area where outsourcing can be particularly helpful is with taxes. After all, you don’t want to mess around with the IRS. Consider hiring a Certified Public Accountant (CPA) or tax preparer to handle your tax filings and financial planning. A CPA or tax preparer can ensure that your taxes are filed accurately and on time, while also providing valuable financial advice and planning strategies to optimize your tax situation. This can help you avoid costly mistakes and penalties, and free up your time to focus on other aspects of your business.

But outsourcing doesn’t have to stop there. You can also consider outsourcing other administrative or non-financial tasks to a virtual assistant or 1099 contractors. Think of it this way: if it’s not your forte, delegate it. For example, you can delegate administrative tasks like scheduling appointments, managing emails, or social media management to a virtual assistant, allowing you to focus on revenue-generating activities.

Outsourcing doesn't mean you're not capable or competent. It's about recognizing your limitations, valuing your time and expertise, and leveraging the skills of others to enhance your business. Whether it’s related to tax season or another area of your business, delegation is a strategic decision that allows you to focus on what you do best.

Take control of your finances

As we look at tax season in the rearview mirror, remember that preparing for next year starts now. Taxes can be stressful for self-employed people, but they don't have to be. Take control of your finances with some planning and action—a little effort now can save you a lot of pain later. 

You can make things even easier for yourself with a Found account. It’s a business checking account designed for the self-employed that helps you keep your spending organized. With automatic expense categorization, tax savings accounts, and real-time tax estimates, it’s easier than ever to manage your finances and prepare for tax season. Get started for free today.

The information on this website is not intended to provide, and should not be relied on, for tax advice.

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