Tax Advice for Freelancers, Business Owners, and Retirees

Tax day is looming. If you’re still gathering your paperwork and crunching numbers, here’s advice for various stages of what’s next for you.

If You’re a Freelancer

Whether you’ve embraced consulting as a career or are working side gigs to supplement your income, Sue Marquette Poremba wrote these tips for Business News Daily:

Learn about estimated taxes  Freelancers making more than $1,000 are required to pay estimated taxes each quarter. Make sure the estimated tax due dates are on your calendar, and stay on top of your income and allowable expenditures.

Hire a professional accountant if your income fluctuates or your financials are complicated. The expense may save you grief and money in the long run.

Don’t neglect your retirement savings Look into a SEP-IRA, which allows you to make contributions as both an employer and an employee of your business.

Read the full article: 8 Tax Tips Every Freelancer Should Know

If you’re a Business Owner

In AllBusiness, Richard Harroch writes about the common pitfalls for small businesses around tax time, including:

• The founders of a company must determine whether to organize the company as a limited liability company (LLC) or a corporation. There are rules about what constitutes a “C” corp vs an “S” corp.
• Sales taxes on goods and services vary from state to state and may apply at the city and county level as well.
• Payroll taxes on employee compensation are the responsibility of the business owner. The taxes are withheld from employee pay and paid by employers on behalf of the employees and the company.
• Workers must be properly characterized as employees or independent contractors. “If the employer has significant control over the worker, the IRS may claim the worker should have been classified as an employee.”

Read the full article: Pay Attention to These 9 Essential Startup Tax Issues

If you’re a Retiree

Kiplinger offers this advice for those who are retired or soon-to-be retired for dealing with the tax implications of their retirement income.  

401(k)

“If you are at least 55 by the end of the year in which you leave your job, you can start tapping your 401(k) funds penalty free– although you’ll still owe income taxes on your withdrawls.” Those 70½ are required to start taking taxable withdrawls from their IRA or 401(k). The amount of the required minimum IRA distribution each year is based on an IRS calculation, and there’s a penalty if you don’t take it, so you’ll need to do some homework.  

Social Security

You can start taking Social Security benefits at age 62, “but your benefits will be reduced by 25% or more for the rest of your life.” Delaying collecting your benefits can have a big impact on your bottom line. “Delayed-retirement credits add 8% a year to your benefit, so your benefit at age 70 would be 32% higher than what you’d get if you claim benefits at age 66.”

Employer-sponsored Pensions and Annuities

These are fully taxable, but the amount varies from state to state. Read about the 10 most tax-friendly states for retirees.

Read the full article: Tax Planning for Retirement

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