Last week we talked about some leftover ideas from National Small Business Week. I implored readers to not hesitate to contact us if there were any questions we could help with concerning the running of a business. In retrospect, I realize that this might be a bit too daunting for those contemplating starting a new business. Because after all, where do you even start?
So this week, let me give you a little bit of an idea of where to start. This link will take you to information the IRS gathered as part of National Small Business Week. This could be a spot that will give you some idea of how to start or at least the right questions to ask. And again, if you need to ask them, you know who to turn to.
I did want to single out one piece of this, though, about the importance of making estimated tax payments. This may be the biggest mental shift that people must make when starting a business. It is also possibly the most dangerous one to not make as early as possible.
For most of us, our first interaction with taxes is when they are withheld from our paycheck in our first job. And most of the time, there is enough withheld there that when we file our taxes without worry, and we often even end up receiving a refund because we paid too much. And this can often continue like this for years – what a deal!
Eventually things may get complicated enough that we must address our withholding to cover tax obligations, but if you stay on top of this, it can always be weathered. When you start a business, though, this becomes a little more complicated because there is not necessarily any money automatically being paid to the IRS and if that number is high enough, the agency is even going to be expecting estimated payments.
Furthermore, this can still be the case even if the ‘business’ you want to start up is a joining the gig economy. When you do that, you will be receiving money and it feels great as it enters your bank account, but no taxes have been paid on it, and that money is going to count as income and be put on top of whatever else you have earned during the year when it is time to file your tax return.
So here then is a very specific question you may have. And if you do want some help determining if you should be making estimated tax payments (and how much they should be), then now you know what to ask us.
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To ensure we don't make the folks at the IRS ornery, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.