Did you recently start working from home? If so, you are likely excited about your new venture, but you may have given little thought to filing taxes. Whether you are an employee or independent business owner, at some point you are going to need to get a better understanding of tax laws and how they apply to individuals who work from home. The following will give you a better understanding of the differences between being a telecommuting employee and being self-employed working from home as far as taxes and withholding are concerned.
If you are an employee, your employer should deduct the taxes from your check unless you can legally file exempt status for taxes. Employees can request that their employers withhold more taxes by filling out a withholding form. You can update the form as needed. Some people request additional withholding if they feel that they may end up owing more than the amount their employers deduct. For example, a person who is filing single and does not have any dependents could end up owing more than the amount their employer is automatically deducting due to their tax liability.
Extensions may be filed if you owe taxes due to there not being enough withheld from your paychecks. Keep in mind that if you overpay, the IRS will refund the amount overpaid, which is why additional withholding is sensible for many people.
Self-employed individuals should pay their estimated taxes quarterly. The practice of paying them quarterly aids in paying out the taxes over time rather than in a lump sum. Some people may choose to wait and pay the taxes in a lump sum the following calendar year. New business owners should use caution when considering whether or not to wait. Imagine finding out that you owe a hefty tax bill for several thousands of dollars due to you not making the quarterly payments. If you cannot pay taxes owed by the deadline, you could be fined. Luckily, you have the right to file for an extension if you cannot pay your taxes owed by the deadline. If your completed taxes indicate that you are due a refund, you can file them at any time before or after the deadline without any penalties.
A business tax preparation service is the best resource to use to ensure that you take advantage of all of the available deductions based upon your situation. Deductions can help lower your tax liability. The costly mistakes on taxes that many self-filers make are less likely to occur when a professional tax preparation service is used, and the cost of the tax preparation may be a deductible business expense. Tax professionals can also file amended returns on behalf of taxpayers who have filed erroneous returns.
For more information and assistance, contact a professional tax preparation company, such as Wiggins, Smit, Burby, Reineke, & Company P.A..