Taxes for the self employed
Hi Terry, I recently left my job as a Care Giver, after almost 6 yrs., with an agency due to the low hourly rate. I’m 76, and enjoy having a paycheck still coming in along with SS and a pension from the IMRF. I am now signed up with an Agency that will send out text messages for the clients they have and if you want to take the client you are basically working for and with the client, not the agency.
They deposit your check in your checking acct weekly. They do not take out taxes or SS. Along with this Agency, I have patients found thru other caregivers references. I have a tax lady who told me to keep track of not only my salary (cash) from non Agency patients but my mileage as well.
I fully plan on paying my taxes on money earned. My main question is: Should I have a business name, get a tax number from the State being self employed or do I wait until 2024 to pay my taxes all at once for 2023. Any benefits including not having the IRS think I’m cheating them somehow. I’d rather do what’s correct than not.
Thank you for any help you can pass on to me.
Terry Says
You say you have a “tax lady” to help you. She should set you up with quarterly estimated tax payments, online and directly to the Federal and state government. The rule is, you are required to pay 100 percent of the total of your prior year’s taxes or 90 percent of your estimated current year’s taxes.
You have some time to wait to start these payments, but it’s best to get all the money in as you go. YOu have until Jan 15th of 2024 to make your final quarterly payment.
You don’t need to set up a business or get a new tax number. You’ll be acting as a sole proprietor. And some business expenses (such as mileage, though at a very low rate, and gasoline, and uniforms if you wear them) will be considered tax-deductible business expenses. That’s why it’s important to keep good records.
And I might suggest you open a separate account from your personal checking account. Use it to deposit all payments from work. And use the debit card attached to the account to pay all business expenses. And use it to pay quarterly estimated taxes. That will make things simpler at tax time.
Use your personal account for SS benefit deposits, etc. But remember, if you earn enough even your SS will become partially taxable. Your tax preparer should take this into consideration when setting the quarterly estimated payments. After the first year, it will become easier to estimate! But set up an ongoing relationship with your tax preparer, so you stay on top of all these details.
