Tom O’Saben, National Association of Tax Professionals director of tax content, joins Wealth! to break down what self-employed individuals need to know about filing their taxes.
“I’ve been a tax professional a long, long time — 30 plus years. Most of the taxpayers that I’ve had that have financial difficulty paying their taxes are self-employed people. Because if you’re an employee, that mechanism occurs every payday where taxes are being withheld. Well, that self-employed person has to get into a process of paying estimated tax payments,” O’Saben explains.
He encourages all self-employed individuals to set up a self-employed retirement program, which you can establish and fund by October 15 for the 2023 tax year. He explains, “What it really means is you can put away about 20% of the net profit of your business into one of these, they call them a SEP plan — Self-Employed Pension.”
By doing this, you can reduce your taxable income for 2023. If there is still a balance due, he recommends getting estimated tax payments for 2024 and setting up a payment plan.
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This post was written by Melanie Riehl