Why Form 2220 Employed 2023-2024

Hello everyone, it's great to have another opportunity to talk to self-employed entrepreneurs. My name is Jeff Godwin, and I'm a CPA currently working for Intuit TurboTax in San Diego. I have been preparing tax returns for over 35 years, and today we're going to be talking about accounting and taxes for self-employed individuals. Now let's get started. First of all, we're going to dive right into what to expect when you're new to self-employment. Accounting and taxes can seem daunting, but I hope to demystify some of those issues today. The first thing you should think about is infrastructure. When you're an employee, you don't have to worry about this, but as a self-employed individual, you need to consider getting a business license. This requirement is governed by the county or city where you operate. Additionally, you may need to look into liability insurance to cover yourself from any possible exposure in your new business. Being excessively organized is crucial when running your own business for the first time. Start by separating your personal and business activities. Have separate checking and savings accounts, credit cards exclusively for business use, and separate savings accounts. Now let's talk about self-employment taxes. Think of them as Social Security taxes. In the past, when you had a regular job, you would see deductions labeled FICA on your pay stubs. This was approximately 7.5% of your gross salary, with your employer matching it. This payment goes towards your social security benefits, and the amount you receive upon retirement depends on how much you've paid in. Self-employment taxes are applied to your net profits, not your gross income. It's important to note that these taxes are in addition to regular income taxes. You also need to make estimated tax payments quarterly. This is similar to how taxes are withheld from...