Wondering how your taxes will change after you've started your own business? Business expert Barbara Weltman discusses some of the changes you need to prepare for.
One of the challenges for many people when they start a business is transitioning from being a W-2 employee to a 1099 independent contractor. The challenge comes when to paying taxes. When you have a W-2, you have income tax withholding. The tax is set aside automatically for you. When you have your own business as a 1099 worker, it’s up to you to set aside the money to pay it when it comes due, typically with estimated taxes which are four times a year. The hurdle for 1099 workers is that when money comes in the door, there are always demands on that cash, for various expenses of things that you want or need to do. But you must put aside the revenues that you bring in to cover your tax requirements.