Tax Refunds & Advice

Are you a sole proprietor? In other words, do you work for yourself? Many people fit into this category, and tens of thousands more will join them in the months to come. Of course, working as a sole proprietor has its benefits and drawbacks from an income tax point of view. Before you work your first day, you need to make sure that you have all of the tax details taken care of.

The first thing that you need to realize is that you no longer have an employer that will withhold the proper amount of tax. Instead, you are responsible for handling your taxes. More specifically, the IRS does not want you to send one payment per year. After all, when you worked for a company they were receiving payment out of each paycheck. For this reason, you need to send quarterly tax payments based on the income that you earn.

Does all of this sound confusing? If so, do not let this scare you away from becoming a sole proprietor. Sure, it is a change of mindset, but once you settle in, it is not nearly as complex as it sounds. To ensure that you are setup properly and on the right track, you should meet with a tax professional or CPA before beginning to work for yourself. Not only can they supply you with the appropriate forms, including those that you will mail to the IRS with payment, but they can also answer any questions. And you are sure to have some concerns on your mind if this is your first go-around as a sole proprietor.

As a sole proprietor you need to take care of your own taxes. Once you know how much to pay and the process for doing so, this will be easy to accomplish. You may be intimidated for the first few months, but soon enough it will be second nature.   

Did you recently file your taxes for 2007? If so, there is no time to wait when it comes to getting organized for next year. The longer you wait to do this, the more difficult it is going to become when you finally decide to move forward. The biggest mistake that you can make is waiting until the beginning of 2008 to attempt to get your tax information in place.

There are several things that you can do in order to start the planning process off on the right foot. First and foremost, did anything go wrong with your taxes this year? If so, you need to make sure that you protect against this during the upcoming year. For instance, if you did not pay enough tax during 2007, you should find out how to make a positive change this year. If you do not protect against the mistakes you made last year, you are bound to repeat them this year.

Staying organized month in and month out is also crucial. Make sure that you are filing your pays stubs, keeping receipts, and staying on track if you are in charge of making your own tax payments. Obviously, the way that you stay organized will be based largely on the type of job that you have. If you are self-employed you will spend much more time organizing and dealing with taxes on a regular basis.

You should always plan for next years tax season as soon as possible. The work that you put in now will pay off when you sit down with your tax professional early in 2008. 

Every year, millions of taxpayers owe the IRS additional money. Of course, they find this out when file their year end return. Many people are afraid to file because they do not have the money to pay anything that they may owe. If you are in this situation, you need to snap out of it right away. When it comes down to it, there is no avoiding the IRS. You may think that avoiding filing is better, but this is not the case.

Did you know that the penalty for not filing your taxes is worse than if you don’t pay your bill in full? The easiest way to understand this is to take a closer look at the numbers. If you do not file, the penalty is generally 4.5 percent of the tax that you owe the IRS. You are hit with this 4.5 percent penalty for each month that goes by. On the other side of things, if you file and cannot afford to pay what you owe, you are only charged with one half of a percent penalty per month. Now can you see which option is better? If you do not file at all you will be paying an extra 4 percent penalty each month. Obviously, this can add up to a large amount over time.

Even if you cannot afford to pay in full, you need to file. At the very least you will be able to send the IRS what you have, and then pay month by month until your bill is satisfied. This sure beats not filing at all, and subsequently having to deal with a 4.5 percent penalty each month.