First Year Self-Employed in Texas: Setup Checklist

A first year working for yourself brings a lot of setup at once. The tax side of self-employment, including self-employment tax and estimated payments, runs on IRS rules applied to your own numbers, and the IRS pages for those are listed under Official sources below. This guide covers the setup around them that is easy to miss: your own access to IRS records for the business, licenses and permits, health coverage, the paperwork new clients send, and free official learning.

The earliest steps, a separate business account, an EIN, a business name filing and a weekly records routine, are in our guide to self-employed tax prep in Kempner. Moreno Financial Services prepares returns for self-employed people across Central Texas, and our monthly bookkeeping starts at $600/mo for owners who want the books kept for them.

Your own IRS access for the business

The IRS runs a Business Tax Account alongside the individual online account. A sole proprietor can register with a Social Security number or individual taxpayer identification number, and the IRS says the account also needs an employer identification number and a return filed as a sole proprietor or farmer. From it you can view tax transcripts, your EIN verification letter and tax compliance reports, and you can now download the EIN verification notice itself, which is handy when a bank or client asks you to confirm the number.

Two cautions from the same IRS page: the Business Tax Account uses the same sign-in as your individual online account, and it is not yet available for LLCs that file as sole proprietors. Keep that sign-in to yourself. The IRS warns taxpayers not to share access to their online accounts with anyone, a tax preparer included.

Licenses and permits

The Governor's Business Permit Office says the State of Texas does not require a general business license, and it points to the business formation or assumed name filing with the Texas Secretary of State or a county clerk as what serves in its place, covered in the self-employed guide linked above. The office helps businesses navigate the state's permitting, licensing and regulatory environment. Licenses tied to a specific business activity are listed in the current Texas Business Licenses and Permits Guide, and local requirements come from your city and county government.

The office also offers a license and permit tracker template for keeping federal, state and local license and permit information in one place, with numbers and renewal details. If your work is a regulated trade, the Texas Department of Licensing and Regulation's active license search looks up licenses by type, name, city, county or ZIP code, so you can confirm your own listing reads correctly.

Health coverage after leaving a job

Leaving a job can mean leaving job-based health coverage. HealthCare.gov explains how self-employed people without employees can use the individual Health Insurance Marketplace, and how losing job-based coverage can open a Special Enrollment Period, with the time limits set out on its page. The Marketplace application asks you to estimate your net self-employment income, which is one practical reason to keep the books current from the first month. HealthCare.gov takes questions at 1-800-318-2596.

The paperwork new clients send

A new client may send a request for your taxpayer identification number before paying you. The IRS describes that request form as the way to give your correct taxpayer identification number to the person who is required to file an information return with the IRS. Keep a copy of every one you complete, along with the client's name and the date, so the income statements that arrive later can be matched to the right client.

A first-year setup list

Beyond the steps in the self-employed guide, here is what the sources above point to:

• Register for the IRS Business Tax Account, and keep the sign-in private
• Download and file the EIN verification notice
• Check the Texas Licenses and Permits Guide, your city and your county for any license your work needs
• Start a license and permit tracker with numbers and renewal details
• Sort out health coverage, and keep the Marketplace income estimate with your books
• Keep a copy of every taxpayer ID request you complete for a client

Free official learning

The IRS publishes a Starting a Business page that collects basic federal tax information in one place. Its checklist for starting a business notes that each state has additional requirements for starting and operating a business, which is where the Texas licensing guide above comes in. The IRS page on business structures, listed below, is the place to read before deciding whether to form an entity.

Questions for the free call

Self-employment tax, estimated payments and how a first year's return comes together all depend on your own numbers, so bring them to a free 15-minute call and we will tell you honestly whether we can help. Have your first months of income records, copies of any taxpayer ID requests you completed, and last year's return. If you also work from home, our guide to running a business from home covers the records and insurance questions that come with it.