When you work for an employer, you often get a tax refund based on the overpayment of taxes withdrawn from your regular paycheck. If you are self-employed, however, taxes may not be withdrawn from your pay, which limits the amount of your refund. Many self-employed people do not receive any tax refund. To maximize your tax refund, you should take certain steps at the beginning of the year and when filing your taxes.
Estimate how much money your business will make over the course of the next year. When you are self-employed, you must make estimated tax payments on a quarterly basis. These tax payments are based on what you believe you will make in the coming year. Calculate your tax liability by referring to a chart at the Bankrate website that shows the various marginal tax brackets. Multiply the amount of money you expect to make by the marginal tax rate for the bracket that applies to you. Divide your tax liability by four to determine the amount you should pay to the Internal Revenue Service each quarter.
Pay more than the amount you calculated you owe on your quarterly tax payments to obtain a tax refund as a self-employed person. Tax refunds are distributed when the government is overpaid, and the overpaid portion is returned to the taxpayer. To generate a refund, you must pay more than what you owe in taxes. The size of the refund is determined by the size of your overpayment.
Minimize your tax liability by having as many deductions as possible. When you are self-employed, you can deduct a number of expenses incurred while doing business from your taxable income. For example, you typically can deduct mileage on your company car, your health insurance premiums, office expenses and the existence of a home office. The more legal deductions you can report, the lower your tax liability becomes. Keep receipts of purchases you plan to deduct to prove these expenses if you are audited.
File your tax return with the help of a trained professional or with tax software, if you prefer. Although you can calculate your tax return yourself with a calculator, you may overlook an expenditure that could be deducted. Consider whether it is worthwhile to pay for a tax preparation service to maximize your refund.