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Category: Business Taxes

Do I Need to File My Self Employment Taxes on My Gross or Net Income?

When you are self employed, you are responsible to pay taxes towards social security, income and Medicare. Usually, these taxes are covered in part by an employer; however, if you are self-employed you are responsible to pay them yourself. You should set aside 30% of your income for self employment taxes.

What is the difference between gross and net income?

In order to determine if you need to pay taxes on your small business and what those taxes are, you have to understand the difference between gross and net income.

Gross income is the total amount of money you earned before taxes or other adjustments are considered.

Net income is calculated by subtracting your gross income from your expenses. This shows your profits or losses for the period.

How do I determine if I need to pay self employment taxes?

The IRS determined that you are subject to self employment taxes if you:

Own a sole proprietorship
Are an independent contractor
Are a partner in a business
A part of any other self-owned business

The next requirement is that you net $400 or more. This is where our gross vs. net income lesson comes in! If you lost money on your business (your net income is in negative) then you don’t owe taxes, but you should still report your loss to the IRS. If you had a net profit of $400 or more then you must pay self-employment taxes.

How do I file my self employment taxes?

In addition to paying income tax, small business owners also file an annual return and pay quarterly self employment taxes.

Self employment taxes are based on estimations. You determine your quarterly taxes based on your previous year’s earnings. The IRS provides worksheets to help you determine what you should pay each quarter.

If you overestimate or underestimate your earnings, the IRS has forms to help you refigure the next quarter’s taxes.

Quarterly Taxes for 2017 are due:

1st payment : April 18, 2017
2nd payment : June 15, 2017
3rd payment : Sept. 15, 2017
4th payment : Jan. 16, 2018

The IRS requires that you submit an annual return stating how much you paid in social security and Medicare taxes at the end of the year.

You can learn more about self employed taxes with these articles

Which Tax Forms Do I File as a Small Business Owner

4 Forgotten Tax Deductions for Entrepreneurs

FAQ: What Home Office Expense are Tax Deductible?

Income Tax Checklist: What Your Accountant Needs to File Your Income Taxes Copy

It’s everyone’s favorite season! TAX TIME! We’re here to make this the easiest tax season ever.

You won’t be scrambling to find all of the important financial documents you need to file your income taxes, only to have your accountant call and tell you he needs just one more thing. Instead, you can take charge with this comprehensive income tax checklist with everything you’ll need to take to your accountant to get the job done accurately and on time.

Download the printable version here.

4 Forgotten Tax Deductions for Entrepreneurs

As a small business owner you have a lot on your mind and taxes often seem like a burden that’s only there to hurt you. If you want to keep more of your hard-earned money in your pocket, you need to educate yourself about small business tax deductions. A lot of business expenses can actually be written of as tax deductions. Are you using these four forgotten tax deductions?

Advertising

Advertising is crucial for small businesses; however, it can be very expensive. Luckily, advertising costs are tax deductible. In order to deduct them you must keep track of your advertising costs.

Ads on these platforms are all tax deductible.

Social Media ads (Facebook, Instagram etc.)
Google Adsense
Billboards
Newspapers and Magazines
Television and Radio
Influencer campaigns

The cost of running the ad isn’t the only deductible expense. These 20 Common Advertising Expenses are also tax deductible.

If you’re a Vyde client the best way to keep track of your advertising expenses is to upload your invoices, bills and receipts. We’ll keep track of them and make sure you get tax deductions for them.

Asset depreciation

You probably claimed new assets or purchases as tax deductions, but did you know you can continue to claim them as asset depreciation deductions? According to the IRS, “Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.”

It’s best to meet with your accountant to discuss which of your assets qualify because the list changes from year to year. A Certified Public Accountant will be up to date on what you can deduct and can help you receive a larger return.

Business meals

Are you taking a client out for lunch or grabbing take out because your team is working late again? You can deduct 50% of the cost of the meal when it is specifically business related.

The key to getting use out of this deduction is to keep track of your expenses. You should do more than just save the receipt for business meals. Track the meal, who it was with and why it was business related in a journal; that way if you ever need to prove that it qualifies you have the records to back it up.

Continuing education

Some small business owners need training to help them improve or grow their businesses. Going to conferences, taking courses or exams can count as tax deductions. The IRS has two requirements in order to qualify.

The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.
The education maintains or improves skills needed in your present work.

Education that is required for your current position or qualifies you for a new trade or business cannot be counted as deductible. Because you are self-employed you must make sure that the education is bettering your business in order to have it qualify.

If you want to learn more about what you can deduct as a small business owner, check out this post on 5 (more) Commonly Missed Small Business Tax Deductions.

FAQs About Forgotten Tax Deductions for Entrepreneurs

What types of advertising costs are deductible for small businesses?
- As a small business owner, you can deduct various advertising expenses, including ads on social media platforms (e.g., Facebook, Instagram), Google Adsense, billboards, newspapers, magazines, radio, television, and even influencer campaigns. It’s important to track these costs and save receipts for tax purposes.
Can I deduct the depreciation of assets I’ve purchased for my business?
- Yes! You can claim asset depreciation as a tax deduction. This allows you to recover the cost of assets over time, such as equipment or property used in your business. The IRS provides an annual allowance based on the wear and tear of the property, and it’s important to consult with your accountant to identify which assets qualify.
Are business meals deductible?
- Yes, you can deduct 50% of the cost of business-related meals, such as client lunches or team dinners. However, you must keep detailed records of the meal, including who was present and why it was business-related, to ensure it qualifies for a deduction.
Can I deduct the cost of continuing education for my business?
- Yes, continuing education expenses like conferences, courses, and exams can be deducted if they are directly related to improving or maintaining your skills for your current business. The education must serve a legitimate business purpose, such as helping you stay current in your field or enhancing your business operations.
How can I keep track of my advertising and other business expenses for tax purposes?
- The best way to track your advertising and business expenses is to save and organize receipts, invoices, and bills. If you’re a Vyde client, you can upload these documents, and we’ll help you track and ensure you’re maximizing your tax deductions for these expenses.

Turn Your Summer Business Trip into a Family Vacation

Question: I’m headed to a vacation hot spot on a business trip this summer and I’d love to enjoy it while I’m there. How can I bring my family along while keeping this a work trip, and share the expense? What are the rules? Answer: You can have your cake and eat it too! Grab your flip flops and beach towels and surprise the family with some summer fun. Here’s how to make it happen.

To claim deductions for a business trip turned family vacation:

– Keep all of your receipts from a business trip. For easy and organized tips on doing this, visit this post.-Set up your out-of-town meetings for late in the week and early into the next, giving you time for family fun over the weekend. The IRS frowns on one or two days of meetings, with five days of fun tacked on the end; but, by scheduling it over a weekend, the longer trip is necessary.– Separate business expenses from personal expenses. For example, you can write off your airline ticket, but not your family’s so you’ll need to book them separately or separate the expense in your books. You’ll also need to split the meal checks, tickets for entertainment, ball games, shows, and other things that cost money on the trip. You can deduct those expenses for yourself, but not for others. Your family and friends are not considered “essential” for the business trip.– If the trip is primarily business, your expenses to and from the destination are deductible. If it starts as a planned family vacation and you add a little business in at the last minute, transportation to and from the destination is not deductible. However, if you drive to the meetings instead of fly, your miles driven are tax deductible, regardless of whether you have the family along.– If you spend less on transportation by staying until Saturday, the IRS has indicated it will generally consider that extra stay time as a business expense.– Meals are only 50% deductible, even if they’re business meals.– If you doubt it is a business expense, it probably isn’t. Remember that business expenses should be ordinary and necessary, even when traveling. Scuba diving is hard to justify as a business expense, no matter how much business talk is done underwater. Keep in mind that the IRS is vigilant about tracking expenses while on a business trip. Plan on a bit of extra preparation and work to make it happen and don’t forget the sunscreen when you go!

When Should I Start Paying Quarterly Taxes for my Small Business?

If you caught Ben on Periscope this morning, he provided a quick overview on the basics of quarterly taxes for your small business. As a small business owner, you’re no stranger to Uncle Sam wanting his cut of everything you’ve make. While you may not need to worry about quarterly taxes during the first few years you’re in business, you’ll eventually get to a point where you need to start paying them…yes, four times each year.

Small business owners operate under a pay-as-you-earn system for federal taxes, rather than a W2 employee who has taxes taken out of their check before it hits their account. The IRS expects small business owners to be responsible tax payers, and softens the blow of a huge end of year tax bill by splitting it up into four installments. These are called quarterly taxes, and you’ll need to pay them if you anticipate your end of year tax bill to be more than $1,000. Use IRS Form 1040-ES to see if you’re tax bill might end up being more than that.

So what if you don’t pay quarterly taxes and you were supposed to? Well, unfortunately the IRS doesn’t forget it and you won’t fly under the radar for long. You’ll just pay your quarterly taxes all at once, when taxes are due in April. The penalty and interest for not paying your quarterlies is based on the difference between the amount you should have paid in for each installment and the amount you actually paid for as long as the underpayment remains outstanding.

Our CPA, Ben, suggests paying quarterly taxes for your small business if you plan to bring home more than $10,000 profit this year.

For 2016, quarterly taxes are due on April 18th, June 15th, September 15th, and then again on January 17, 2017.

How to Save Money on Your Taxes if You Were Uninsured in 2015

If you were uninsured in 2015, you may owe a penalty on your taxes this year. However, you can still save money by claiming an exemption, which about 70% of Americans are doing in 2016. A whopping 300,000 people who paid the penalty last year would have qualified for the exemption, according to the IRS. No worries, Mazuma won’t let that happen to you. Here is the good news and the bad news about being uninsured in 2015.

Here’s the bad news first: the penalty has increased since 2014. The penalty for being uninsured in 2015 is $325 per adult and $162.50 per child (up to $975 for a family) or 2% of household income, whichever is greater. Yikes. You’ll sometimes hear this penalty called the “individual responsibility payment.” If you went without coverage for only part of 2015, you’ll only owe part of the fee.

There is good news, though! For some Americans who do not already have insurance through their employer, their parents, Medicaid, Medicare, the Veterans health care program, individual insurance, or healthcare.gov– you may be exempt.

The Affordable Care Act allows certain people to claim exemptions, even if they were uninsured in 2015. These people may be followers of particular religious groups, members of Native American tribes, and people who do not meet the minimum income requirement, leaving them unable to afford healthcare coverage.

For the most part, if you were uninsured in 2015, you’ll have to pay the penalty. But, here’s a list of specific cases where you may be able to get an exemption.

Exemptions include:

You’re uninsured for less than 3 consecutive months of the year
Your lowest-priced coverage option is more than 8% of your household income
You don’t have to file a tax return because your income is under the IRS filing requirement ($10,000 if single, 20,000 married filing jointly)
You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
You’re a member of a recognized health care sharing ministry
You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
You’re incarcerated, and not awaiting the administering of charges against you
You’re not lawfully present in the United States,
You may qualify for the Cancellation Hardship Exemption if you received a cancellation notice due to your health plan not meeting minimum requirements.
You also may qualify for a hardship exemption if your circumstances affected your ability to purchase health coverage

(List from Intuit.)

Still not sure if you qualify for an exemption? Give Mazuma a call, we can help.

5 Tips on Getting Financially Fit This Tax Season

Tax season is in full swing and that April 18th deadline is coming quickly. If you missed the boat on setting financial new years resolutions (or maybe you fell off the boat and need to get back on), here are a few ways to revamp and get yourself and your business financially fit during tax season:

Close out the 2015 year. A lot of taxpayers don’t actually know where they stand for the previous year until they get their taxes done. Even though you’ve still got a month left to file, it’s best to get your taxes done as soon as possible so you know your income and expenses for the previous year. Gather up your receipts and invoices and make an appointment with your accountant so you can officially close the books on 2015.
Be smart with your refund. Make a plan for what you’ll do with your refund before it hits your account. It’s too easy to just spend it away if you don’t have a spending/savings plan beforehand. Write down your goal so you’ll stick to it. Here are a few ways to invest your refund back into your business. On the other hand, if you owe taxes to the IRS, get them paid ASAP. You don’t want a looming tax bill all year long, although you can set up a payment plan with the IRS if you need to. Pay as much as you can as soon as you can, and plan to set aside money along the way next year so you’re not hit with a big bill next tax season.
Pay yourself first. As a business owner, it’s easy to take care of everyone else and every other expense and then not have a paycheck at the end of the month. Rather than just keeping what’s left over as your paycheck, set yourself a salary and try to follow it as closely as possible. This also makes tax season a little less of a headache.
Create a plan for the remainder of the year. If you didn’t create a plan in January, now is the time! You’ll know where you stand financially after you get your taxes done, so you can budget accordingly for the rest of the year. You may decide you only want to create your budget a month at a time, which is fine, but be sure to keep the big picture in mind as well. Here are a few tips on creating a simple budget for your small business.
Find ways to save money. Again, now that you know where you stand this tax season, dig a little deeper into your budget and find ways to save money. Cut out unnecessary costs and get your spending on track. The best way to do this is to keep meticulous track of all expenses for a month or two, and adjust accordingly.

How are you getting financially fit this tax season? We’d love to hear in the comment below!

FAQs:

1. Why is it important to close out the 2015 year for taxes?
Closing out the previous year helps you understand your financial standing and prepare accurate tax filings based on income and expenses.
2. What should I do with my tax refund?
Have a plan in place before receiving your refund to avoid impulsive spending. Consider reinvesting it into your business or paying off debts to enhance financial stability.
3. What if I owe taxes to the IRS?
If you owe taxes, prioritize payment to avoid accumulating interest and penalties. Setting up a payment plan with the IRS can help manage the burden.
4. Why is paying myself first important as a business owner?
Prioritizing your salary ensures financial stability and helps streamline tax obligations, making tax season less stressful.
5. How can I create a budget for the remainder of the year?
After assessing your financial status post-tax season, develop a comprehensive budget considering both short-term and long-term goals. Regularly monitor and adjust as needed to stay on track.

The Business of Blogging Part 9: Pay Quarterly Estimated Taxes

Now that you’re making money on your blog, you’ll need to pay quarterly estimated taxes. If you traded in your 9-5 day job for your blog business, you may not have even heard of quarterly estimated taxes. Here’s a quick rundown for you:

If you worked for someone else and received a paycheck, taxes were already withheld and you didn’t have to worry about them. However, if you’re self-employed, you’re still required to pay those taxes. Those come in the form of quarterly estimated taxes. Quarterly estimated taxes cover social security, federal, and state taxes. You’ll need to pay quarterly taxes if you anticipate having a tax bill of $1,000 or more for your blog this tax year.

Here’s how to pay quarterly estimated taxes for your blog business:

Use Form 1040-ES to estimate how much you owe. A good rule of thumb is to take what your projected income is for the year, and divide by four. Take that number and multiply by 15%. This is the amount you’ll owe the IRS for your quarterly taxes. This amount is not exact though, and you’ll need to reference last years’ tax returns and follow the instructions on Form 1040-ES to determine how much you owe.
Quarterly estimated taxes are due on April 18th, June 15th, September 15th, and January 17th 2016. You can pay all four installments by April 18th, or submit your quarterly payment by each of these deadlines. The IRS allows you to pay quarterly estimated taxes online, by phone, or by mail.

Love this post in our Business of Blogging Series? You might also enjoy:

Separating the Blogging Myths from the Blogging Truths

Deciding on a Business Entity for your Blog

Obtaining a Tax ID Number and Proper Licenses to Run Your Blog Business

Start Making Money on Your Blog

Creating and Maintaining an Organized Bookkeeping System for Your Blog

Tracking Blog Expenses the Right Way

How to Create a Budget for Your Blog

Hiring an Expert to Manage Your Blog Finances

Which Tax Forms Do I File as a Small Business Owner?

Depending on your business type, you need to file tax forms that report your business’ income for the year. The IRS requires different paperwork for the different business structures–Sole Proprietors, LLCs, and S Corps. While there are different forms for the varying business structures, taxable income for small businesses is generally calculated in the same way.

Sole Proprietors

Sole Proprietors and Single Owner LLCs, report business income on a Schedule C. A Schedule C form is filled out and attached to a personal tax return (1040.) A Schedule C reports your business’ income and losses. To simplify the process, some small business owners opt to fill out a Schedule C-EZ instead. This simplified version of a Schedule C omits the details and just asks for your business income and expenses. There are some stipulations to using the EZ form, though. You can only fill it out if you operate one sole proprietorship, do not report more than $5,000 in business expenses, are reporting a net profit, don’t hold business inventory during the year, have no employees and are not claiming a deduction for a home-office.

If you file a Schedule C for your business, you’ll likely also need to file a Schedule SE. (Schedule SE stands for “Self-Employment Taxes.”) Being self employed means that you don’t have an employer withholding money from your paycheck to cover Social Security and Medicare Taxes; therefore, you have to pay them yourself. If your sole proprietorship or single member LLC earns more than $400 of net profit, you’ll need to fill out this form in addition to the Schedule C.

Because Schedule C’s are filed with personal returns, the filing deadline is the usual April 15th. (April 18th in 2016.)

LLS and S Corps

LLC and S Corporations report business income on Form 1120. This form is for reporting income, gains, losses, deductions, and credits, and also for figuring your income tax liability for the year. You should file form 1120 separately from your 1040. Form 1120 is more detailed than a Schedule C form.

A Form 1120 must be filed by the 15th day of the third month following the close of the tax year, which for most taxpayers is March 15. You cannot send this form to the IRS with your personal income tax return.

Still have questions about which forms you need to file for your small business? Send us a quick message and we’ll help you out.

10 Reasons to File Your Taxes Early This Year

In case you needed a little extra motivation to get your taxes done before the rapidly approaching April 18th deadline, here are a few reasons to get you moving.

Here is Vyde’s top ten list of reasons to file your taxes early this year:

You can actually file your taxes now and not pay your tax bill until the due date. So offload the stress and save up to pay your tax bill, and you’re good to go!
Get your refund on it’s way. If you’re receiving a tax refund this year, filing early will get you your money sooner.
Prevent identity theft. Criminals can use your name and Social Security number to file a false return and get your big whopper of a return in their pocket instead of yours. Obviously, this can’t be done if your taxes have already been filed so getting it done early helps protect you.
Reduce errors. Take your time and don’t feel pressured by the April 18th deadline. Instead, set an earlier deadline for yourself and work through your taxes as efficiently as possible.
Help your college-aspiring student apply for FAFSA. If your child or dependent is applying for financial aid for college, they’ll likely need your income tax return.
Get organized with your business and reflect on last year’s numbers. If you didn’t take the time at the end of last year to reflect on your income and expenses, now is a great time to see how the last year ended financially. Make projections for this year, adjust your budget where necessary, and make a plan to stay organized in the future.
Gives you time to set up a tax payment plan with the IRS. If you can’t meet your tax obligation right away, you can set up a plan with the IRS to make monthly payments until you’re all paid up.
More one-on-one access with your accountant. By mid-March of the 2015 tax season, 74 million people had already filed their income taxes. That left the remaining 57 million just one month to file theirs by the deadline. Filing early gives your accountant more time to field your questions and catch any deductions you may have missed.
Early filers receive larger refunds. According to statistics from the IRS, taxpayers who file by mid-February get significantly larger refunds than those who file later—almost $450 on average.
Reduce your stress. The IRS tax deadline isn’t flexible, so filing taxes is not a task you can put off for long. File early and get on your way to a beach vacation–or at least get back to fulfilling the needs of your business.

Need help filing your taxes this year? Give us a call and we can take care of it for you.

Frequently Asked Questions:

1. Why should I file my taxes early?
  Filing early allows you to offload stress, receive your refund sooner, prevent identity theft, and reduce errors by giving yourself more time.

1. Can I file my taxes now and delay payment?
  Yes! You can file your taxes now and pay any owed taxes by the April 18th deadline, allowing you to manage your finances more effectively.

1. How does filing early help with FAFSA?
  If your child is applying for financial aid, they’ll need your income tax return. Filing early ensures you have this document ready for their FAFSA application.

1. Will I get a larger refund if I file early?
  Yes! Statistics show that taxpayers who file by mid-February receive significantly larger refunds, averaging almost $450 more than those who file later.

1. What are the benefits of having more time with my accountant?
  Filing early provides your accountant with more time to answer your questions and identify potential deductions you might have missed, optimizing your tax return.

Vyde is a licensed accounting firm (CPA) based in Provo, Utah, and members of the AICPA. We provide professional accounting services to businesses and individuals, with a focus on small business bookkeeping and taxes.

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