My husband just became self-employed, any helpful points?

Question

I would like help on doing payroll and paying the taxes and what we can deduct on our income taxes, he'll be doing a lot of traveling but none over night.

Answer 1

You need to be careful. If he is self employed (sole-proprietor) reporting income on a Schedule C - he SHOULD NOT be paying payroll. You pay your taxes via quarterly estimates. He might be able to incorporate and pay himself wages, but I generally do not advise someone to do that until they have established that they will be profitable. A local CPA should be able to help you navigate the rules for your situation, and many will not charge to meet with you initially. You can certainly try to learn the rules on your own and save yourself some money, but if you mess up, your downside is generally much more than what you may save yourself.

Answer 2

Check with your online banking provider to see if they have a payroll service. This is very helpful, saves you lots of agony in preparing payroll and taxes. It runs about $20/month and well worth it.
You can deduct part of your home costs for running a home office.
Take the entire square footage of your home, then measure the space you use as an office (a bedroom perhaps?)
If the space used as an office equals 25% of your total square footage, you can deduct 25% of your heating, water, mortgage or rent payment and home owner's taxes/insurance.
To calculate deductions for traveling, there are two ways:
1. Your husband uses a vehicle SOLELY for business. If you have another vehicle you use for personal purposes, you can deduct the whole annual mileage of the business vehicle. You MUST have another 'personal' vehicle, otherwise IRS will frown on you deducting all the mileage.
Get on the IRS website for many helpful tutorials and publications:
http://www.irs.gov

Answer 3

I know a self employed millionaire that suggests setting aside 25% of whatever you take out of the business for taxes. I'll take his word for that. I recommend consulting with a CPA to get started with proper record keeping. That is crucial regardless of the business you husband is in. Deductions depend on the nature of the business, but the CPA will be able to help with that. As for payroll, unless your husband has employees working for him, it does not exist in his business. If he does, you need to consult a CPA or other professional YESTERDAY.

Answer 4

My field of expertise is payroll and payroll taxes (over 12 years experience) and have a lot of experience and knowledge on income taxes. Feel free to email me, I will help you as much as I can.