What are you doing about taxes?

[jenseib]

I checked out that outright. Wow. I'm going at it wrong I think. I'm gonna owe more than I thought. For 325 I put in my expenses, which brought it down to 134 and change and I still will owe $31 and change for taxes on that amount. I guess I was thinking the expenses just deducted the actual tax amount rahter than lowering my profit.
So here's another question. I started in July. Do I use the internet connection from July on, or can you use the whole years worth?
I checked out the irs site too and got nothing out of it. Too much mumble jumble for me to understand.

[charmed]

For any deduction you can only take the portion directly related to your business.

Even though the IRS site feels confusing it is imperative that you read the publications, and get to know what the IRS says about these issues otherwise you may do something wrong, or you might not do enough and pay more than your fair share.


It really isn't that hard to learn if you just read it, and the publications recommended, before you know it you'll be a pro. Read Publication 525, Taxable and Nontaxable Income. Also read Publication 535, Business Expenses.

In general you can deduct from your income anything that you must have to conduct your business. The IRS calls this "ordinary and necessary". For things you also use for personal use you must deduct only the portion for business. Also, in most cases you must use said item at a minimum of 50% for business to get anything.

The other alternative is to put aside at a minimum 20% of your income without deducting any expenses. Then save all receipts of anything spent in a shoe box or a file then take that to a CPA to do for you. The CPA services are deductible and will more than pay for itself.

Also another thing to consider is your tax bracket. You can look at tables on the IRS site to find out which bracket you're in. The top rate right now is 35%. You don't pay 35% on ALL income though only over 372,950 of income so it's not that simple but in general, if your family makes up to 16,700, your tax rate is 10%, up to 67,900 it's 15%, up to 137,050 it is 25%, up to 208,850 it is 28% and over 372,950 it is the 35%. This is just your FEDERAL TAX rate. You also have state taxes, Social Security, Self Employment Tax etc..

So what I would do, if nothing else is figure out what tax bracket I was before I started my work at home activities, then put aside the corresponding percentage above. Then you'll likely be more than safe because that is without deductions.

Then you'll have plenty of money saved.

If you're earning really good money and supporting yourself from your work at home ventures you really should be paying that money to the state and federal government quarterly to avoid penalties.

So again, if you can't figure it out, hire a bookkeeper, or a CPA it'll be more than worth it.

[jenseib]

Honestly I did read some of the irs site and didn't understand a word of it. But I will not be doing our taxes. My DH is self employed (dairy farmer) so all our taxes are always done by an accountant. We don't pay quarterly though. I don't think $300 or so a month is considered successful though. LOL!
I was shocked though with the deductions I had put in on that site you gave me, that with just under $500 considred profit, it said I would owe $121. in taxes. Like I said, I was figuring it much differently. Now I have to put more aside to cover that, plus the new incomes.

[jenseib]

Where are you finding these publications at?

[mom2fourCT]

Disclaimer: This is not financial advice. Just my personal situation.

I have another online business that I am trying to launch that will sell quilts online. I also mystery shop and now do KGB and I have a full time job ( I just can't seem to make ends meet no matter how much money I make...)

I talked to a financial advisor because I am hopeless at tax stuff. This is what I was told would be a good plan. If you are good at saving and can afford to pay it quarterly then you can do that - this is just what will work for me because I am not a saver.

I have 5 dependants and I am the head of Household but on my W2 I only claim 2 deductions instead of the 6 because I never ever want to owe the IRS money. So for my home business and my kgb and mystery shopping, suggests that I save 40% of everything that I make as a contractor in a separate account. For deductions I have my website, paper, ink, billing software, books, ebay and website expenses. save all of those receipts.

If your bank has a tax expert (mine offers it free) you might want to sit down with them. H&R Block also offers the service and I am not sure if it free or not.

Hope this helps someone.

[diamonds44]

Did anyone else get their 1099-MISC yet?

[jenseib]

Yes, I got mine 2 days ago

[jenseib]

Yes I got mine 2 days ago

[diamonds44]

I found this info on 1099-MISC, it may be helpful How to Calculate Taxes on Form 1099-Misc | eHow.com

I'm really not sure how to do all this....

[nickelsthoughts]

This is my first year as an IC as well, but from what I understand 15% of what your make is for social security and medicare. From there you have to take out the state tax as well as the federal tax. Once I make over the $600 limit I'm going to see an accountant. I think it will be worth it so I can set up to pay taxes quarterly. This way at the end of the year we can still get our tax return and I won't make DH mad, cuz I know he'll be upset if we have to pay and disappointed if we don't get a return. Right now I'm not touching the money I made, I'm going to first use if for business expenses like the accountant, a laptop and a computer desk. And tehn from there I'll see how much to take out in taxes and then decide if I'm turning a profit.... That;s my plan.....