The IRS takes a big tax bite out of many home business owners bank accounts because they fail to pay attention to a little tax called “Self Employment tax”.
If you are a Sole Proprietor (which you are by default… 80% of businesses are), you are liable NOT ONLY for income tax come April 15th, BUT ALSO self employment tax equal to 15.3% of the bottom line income you made last year from your at home business.
Let’s say you made $50,000 last year, after expenses. 15.3% means over $7,000 in self employment tax–on top of the income tax that’s due. That’s big money.
And a big reason why self employment tax can make you cry. Unless you do a little tax planning. Actually, it’s easy if you “know the code” (the IRS code, that is!).
More next time, but here’s a hint. There is a way to structure your business so you can shield some of your hard-earned income from the grasp of Self Employment tax. And if you were a Superhero… and not just a Superman or Superwoman (with kudos to Alicia Keys), that S on your chest (as in S Corp) could be just your passport to Low Tax Heaven.
That’s it for this time. Till next time, success to you and your work from home business!