Self-employment gives you a lot of benefits, including the freedom to make your own schedule or even work from home. However, self-employment also means more responsibility. Come tax season, it’s hard to gather all the relevant information necessary.
Further, if you’re getting paid directly, you may not have withheld taxes or unemployment insurance throughout the year. This means that you may face a large payment after you file your taxes.
Fortunately, pay stubs and self-employment are not a paradox. You can issue yourself pay stubs throughout the year to make tax time much easier to handle.
Pay Stubs and Self Employment: How it All Works
The simplest way to issue yourself a pay stub is to run a payroll service. There is a ton of software available, like The Pay Stubs, which automatically issue pay stubs that let you track your earnings for each pay date. The Pay Stubs also allows you to create a W2 form at the end of the year which helps expedite filing your taxes.
By calculating your withheld taxes based on what you made last year, you can make sure you hold that money in a separate account. This means that once tax season rolls around, you aren’t left hanging with a huge bill and no means to pay it.
Other payroll services, like ADP Workforce, are full service and will automatically withhold taxes for you from your paychecks. This means that you won’t have to do extra work during the tax season yourself. Instead, you pay what you owe in a lump sum – and if you kept the funds in a high-interest savings account, you’ll likely have money left over!
These platforms also allow you to add other employees for an additional cost easily at any point. This means you can easily scale up your business if you bring on more staff.
Check with the bank you use the most to see if they have a partnership with payroll providers. Often, as a bank customer, you can get a discounted rate and can set up direct deposit quickly.
Why are Pay Stubs Needed?
Beyond streamlining filing your taxes, having pay stubs is very important. This is because they prove consistent income and make it easier for you to access credit. Applying for a mortgage or loan is much easier if you can prove that you regularly make money.
Maintain Your Financial Health
Now that you know the benefits of issuing pay stubs and self-employment, also look at the risks that come with working for yourself. You want to make sure you have a financial cushion to fall back on in case you have a few slow months.
For more information about alternative ways to invest your money to diversify your portfolio, check out the trading and investment section of our website.