Business

Plan Ahead to Avoid Tax Time Surprises

Whether you’re working at a company or if you have a small business, we are all obligated to pay our taxes.

Taxes are very important in that the government needs it to fund certain things such as infrastructure projects, improved healthcare, among others.

Now, although we are required to pay taxes, there are some people who have problems, especially when it is time to collect them.

If you want to avoid the hassle and problems that may arise coming tax collection time, then you would want to read this article.

Today, I am going to go over some ways you can plan ahead to avoid tax time surprises.

What is Self-Employment Tax?

Before anything else, there is a term that is commonly used nowadays and that is Self-Employment Tax. What is it?

Well, the gist of this is that it is just the tax that a small business owner has to pay to the government to fund their social security and to finance their Medicare.

Typically, you need to pay 15.3% of the total profit of your business as your self-employment tax. It may be steep for some, especially if you’re still new to businesses. But, it gets better once you’ve established your venture.

Now that you know what self-employment tax is, how can you avoid problems when the time comes to collect your taxes?

1.    Calculate your Tax Obligation

Before anything else, it is highly important to calculate that tax that you need to pay. This varies depending on the country you are in.

Basically, your income will be placed in brackets and that will be taxed accordingly. Furthermore, income from various sources can also be taxable such as your wages, commissions, bonuses, sick pay, tips, etc.

What I am trying to say is that it is best that you calculate everything so that you will know how much you need to pay. If you have problems, there are countless tax calculators online that you can use.

2.    Don’t Wait to Pay

You should always pay your taxes on time to avoid any problems in the future. Failure to pay on time can get you imprisoned!

If your taxes seem to be impossible to pay for the time being, you can use other methods of payment. A personal loan is a great option and a lot of people are opting for this to pay their taxes as well.

3.    Properly Hire Employees

If you’re a small business owner, it is best that you hire the right employees for your organization. Also, it would be wise to have an HR department that would handle your employees’ records, pay slips, and even taxes.

4.    Save for Liability

It is always a good idea to save a portion of your earnings and profits. This is so that you have enough money to spend whenever an accident comes. This is also the right thing to do because, again, failure to pay taxes in due time can have dire consequences.

5.    Think About the Future

Whether you are a business owner or a working individual, you need to plan for the future. You see, whenever your earnings or income increases, so will your taxes.

Always be aware of how much you need to pay. Always calculate them and always apportion some of your profits to your savings account in case something goes awry.

Planning for the future will help you eliminate unnecessary stress.

Conclusion

We have an obligation to pay taxes. Whether you’re self-employed or you’re working for a company, we should pay them promptly.

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Author’s BiornLidia Staron is a content writer for OpenCashAdvance.com, specializing in personal finance and small business issues. She contributes articles about the role of finance in the strategic-planning and decision-making process.

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