A Last Minute Tax Guide and Infographic for the Sole Proprietor

A sole proprietorship is a sole proprietorship with one owner and there is no legal distinction between you and the corporation

Blog / Accounting
A Last Minute Tax Guide and Infographic for the Sole Proprietor
Last Minute Tax Guide and Infographic for Sole Proprietors
Filing income taxes as a sole proprietor is fairly simple, because a sole proprietorship is not a separate legal entity from the business owner. Income from the business is treated as your personal income, which means a sole proprietor must report any business income (profit minus expenses) on his or her personal income tax return.
What is a sole proprietorship?
A sole proprietorship is a sole proprietorship with one owner. There is no legal distinction between you and the company. This means that you are personally responsible for all aspects of the project, including business debts, losses, and liabilities. If someone files a legal action against a sole proprietorship, they will likely go after both the business assets and the owner's personal assets.
In other words, a sole proprietor has unlimited personal liability.
Unlike other types of business structures - such as LLCs - you don't have to file any paperwork or pay any fees to establish a sole proprietorship. In fact, any new business with one owner is automatically considered a sole proprietorship. For example, if you do freelance work outside of your regular job where you work full time, that business is under sole proprietorship if you don't set up any other type of business entity.
A Last Minute Tax Guide and Infographic for the Sole Proprietor
 
What a sole proprietor can and cannot do:
There are some important sole proprietorship restrictions you should know to make sure you pay your taxes correctly and to avoid any penalties or fees:
As a sole proprietor, you can:
Obtain an Employer Identification Number (EIN) from the IRS to avoid sharing your Social Security Number (SSN) with clients
Hire employees (if you have an EIN)
Consolidate your personal and business property and finances (although it's a good idea to keep separate bank accounts for your sole proprietorship so you can more accurately track expenses, which you can claim as deductions on your tax return)
Register your business name if it differs from your name
Own more than one sole proprietorship (although you will have to report profits and expenses on separate Schedules C)

Use this last-minute tax guide to help simplify the tax filing process and increase your savings. Once you're done.

Important tax dates to remember
As a single business, you will likely work with several clients and will receive tax receipts  for work performed throughout the year. Likewise, if you outsource the business to another independent sole proprietor, you are responsible for claiming these payments on your taxes.
Here are some other important tax dates to remember as a sole proprietor.
Deadline for annual tax return
The deadline for an individual's tax return is usually on a certain day, depending on the law of your country. To avoid delays, be sure to postmark or file your tax return online by whatever deadline applies to you.
Quarterly tax payments
The IRS requires that taxes be paid when income is earned; This is especially true for sole proprietors. Instead of your employer having the luxury of withholding taxes from your paycheck and paying them on your behalf, you have to pay a portion of your earnings every quarter.
The calculation of your quarterly payments depends on your income tax bracket and earnings. However, most experts recommend setting aside 20% to 30% of your income to pay estimated taxes. It is best to  consult with a tax professional  or a tax expert who can help determine the best amount for your personal situation. For more information, see our guide to quarterly tax payments.
Deadline for extending your tax return
If you are requesting an extension to file your tax return, it must be submitted by the filing date. Additionally, even if you plan to file an extension on your taxes, you still must pay all (or most) of your tax balance due by this deadline as well.
Tax penalties
There are many different tax penalties that occur as a sole proprietor, and they can happen for two reasons: if you miss a tax filing deadline or miss an estimated tax payment. Each one varies depending on your type of situation.
An underpayment fee may be assessed  if you do not pay your taxes by the filing date, or make a calculation mistake and do not pay enough of the balance due.

If you forget to make an estimated tax payment by the quarterly due date, you'll be charged a small penalty for late payments. The same penalty rules that apply to the tax filing deadline may apply to late quarterly tax payments.
When possible, make all income tax or estimated tax payments as quickly as possible, because waiting will only add more penalties and interest fees.
Last minute deposit tips
The last thing you need to decide is whether you want to send your return via regular mail or submit it  online . Filing your tax return online can help you avoid any “lost in the mail” incidents and reduce the risk of other individuals actually intercepting personal information.

conclusion:
If the tax filing deadline creeps up on you, and you find that you're not quite prepared, it's best to go ahead and file your taxes anyway and pay what you owe sooner rather than later. You can amend your return later to give yourself extra time to correct any tax forms or additional expenses. This may cost you an additional hundred dollar fee, but it will save you from paying penalties and interest fees to the IRS.


Share :

Add New Comment

 Your Comment has been sent successfully. Thank you!
Error: Please try again