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If you are now the proud owner of your own business, congratulations! By now, I’m sure you’ve experienced some ups and downs which usually comes with running your own show. But as you start to find your bearings and navigating your way as a new business owner, it’s important to remember certain tax implications.

Here are some tips to get you off on the right tax foot and keep your business running smoothly throughout the year!

Keep records

It seems pretty elementary, doesn’t it? But we can’t emphasize it enough! Many self-employed people put record-keeping low on their list of priorities, and at the end of the year can end up with a drawer full of receipts and no formal records to use to prepare their taxes or anything else. While the IRS doesn’t dictate what kind of records you should keep, it does require that the records be complete and accurate. QuickBooks will help you easily track your income, expenses, and mileage year-round. You can then export your information to your TurboTax Business tax return eliminating data entry.

Deduct an office in your home

There are a lot of rumors about home offices triggering IRS audits. Don’t let those stories keep you from taking a home office deduction if you qualify. If you regularly and exclusively use part of your home to perform administrative or managerial activities for your business, you can claim a home office deduction for a portion of your utilities, rent or mortgage interest, depreciation, cleaning and the like, based on the percentage of space you use for your home office. You can also take advantage of the simplified home office deduction up to $1,500, which is the set dollar amount of $5 per square foot of your home used for your business up to 300 square feet.

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Report your income

If you are self-employed, you will start seeing 1099-NEC from your contract work or possibly 1099-K forms to report your income, but you may not necessarily receive the tax forms to report your income. 1099-NEC will only be issued if your client is paying you $600 or more for your freelance or contract work. For tax year 2023, you will receive a 1099-K form if you accept payment through a third party provider and what you received exceeds $20,000 and 200 transactions. The American Rescue Plan of 2021 changed third party payment processors reporting requirements to payments processed exceeding $600, which is down considerably from the original more than 200 transactions per year and exceeding an aggregate amount of $20,000 reporting requirement.  This meant you would receive a Form 1099-K for payments processed for goods and services that exceed $600.

However, the IRS announced a delay in reporting thresholds for third-party settlement organizations set to take effect for the upcoming tax filing season. As a result of this delay, for tax year 2023 (the taxes you file in 2024), the existing 1099-K reporting threshold of the aggregate of more than $20,000 in payments and  over 200 transactions will remain in effect. The IRS is currently planning for a threshold of $5,000 for tax year 2024 (the taxes you file in 2025) as part of the phase in to implement the lower over $600 threshold enacted under the American Rescue Plan.

Young Black woman using a calculator and typing on her laptop.
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Set money aside for retirement

When you start a business, it can be a financial struggle at first and you have to tighten your belt. Once your business becomes profitable, don’t let your belt out just yet – use your increased cash flow to set aside funds for your future retirement. Depending on the retirement plan, those retirement funds may garner you a current tax deduction

Set money aside for income taxes

You mean I owe taxes on money I’ve already spent? Yes, this is an area where self-employed sometimes don’t plan. You don’t have to file your taxes until the tax deadline which this year is April 15, but you still may be required to pay estimated payments. Those payments will be applied against the total tax you show on your tax return for the year.

With NEW TurboTax Live Full Service Business, we enable the small business owner to be paired with a dedicated tax expert specializing in small business taxes to handle Partnerships (1065), S-corp (1120-S), and multi-member LLCs. Get matched with a dedicated small business tax expert, enjoy unlimited year-round advice and answers at no extra cost, and be confident that our small business tax experts will help you find every tax deduction and credit your business deserves.

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