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Financial Mistakes to Avoid If You're Self-Employed and Buying a House

Another great reminder for those of us who practice real estate.  Remember, you have got to "Give unto Ceasar what is due unto him."  The consequence for falling short of this can be severe.  Thanks to the Marcus Rice's Team for providing us this reminder

 

Financial Mistakes to Avoid If You're Self-Employed While Trying to Buy a House

It seems there are more and more people becoming self employed these days or at the very least, many folks are starting a side business, turning a hobby into some extra income or doing some type of independent contractor work. Whether you've decided to turn your blog into a business, sell a multi-level marketing product, or rent a storefront to start selling your homemade jewelry, there are some mistakes you will definitely want to avoid.

Not Setting Aside Money for Taxes

This seems simple enough, but is probably one of the biggest tax mistakes people make. The number of people that haven't set aside money for taxes is pretty high. If you are a 1099 contractor, the company you are contracted with does not pull out taxes for you.

At first, this feels great because your paycheck is higher then reality sets in when it's time to file your taxes. Uncle Sam requires you to make quarterly estimated tax payments. If you don't have enough paid in for your estimated taxes you could face some penalties.

Another thing people fail to realize is the self-employment tax that's due. Uncle Sam charges 15.3% tax for self-employed individuals in addition to your regular income tax. This is equivalent to the FICA tax on a regular paycheck. The good news is that you can deduct half of your self-employment tax, but you still have to pay.

Not Keeping Track of Income and Expenses

This is one of those mundane tasks that most owners hate, but every business must do in order to maximize deductions as well as protect themselves from an IRS audit. A business owner should be organized when it comes to keeping track of income and expenses. Don't write down your mileage on a napkin each time you travel. Get a notebook, use a spreadsheet or some budgeting or personal finance software to track the amount of your expenses, the category (i.e. office supplies) and a brief explanation of what you purchased etc.

Don't rely on your memory to come through for you when you need to report an expense. Keep your receipts, develop a system and keep up-to-date.

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The Marcus Rice Team
RE/MAX Allegiance

 13204 Hull Street Rd. 
Midlothian, VA 23112

Call Marcus at 804-247-8187
Office 804-419-1420

www.richmondvahome.com
email:
remaxrice@live.com
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Certified Distressed Property Expert

Marcus  Rice

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C. Lloyd McKenzie, MBA

Associate Broker

Berkshire Hathaway HomeServices

New Mexico Properties/Allstar, REALTORS

6739 Academy Rd. NE SU 200

Albuquerque, New Mexico 87109

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Phone: (505)750-8552
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Comment balloon 3 commentsC. Lloyd McKenzie • August 26 2012 07:03PM

Comments

That is a great blog to reblog. Taxes is one of those that will catch many if they are not careful. Settig aside the taxes is very important to make sure uncle Sam is not coming after you.
Posted by Mike Yeo (3:16 team REALTY) about 5 years ago

The many challenges of being self-employed. I think we should have special exemptions so we quailify. Of course it's not such a bad thing to put a large downpayment down either.

Posted by Winston Heverly, GRI, ABR, SFR, CDPE, CIAS, PA (Winston Realty, Inc.) about 5 years ago

Very worthy reblog!!

Everyone buying a house needs to pay attention to these simple rules to make their lives and their purchase so much better

Posted by David Shamansky, Creative, Aggressive & 560 FICO - OK, Colorado Mtg (US Mortgages - David Shamansky) about 5 years ago

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