Posts Tagged ‘home business questions’
Home Business Questions
July 20th, 2010
Question: Home Business & Quarterly Tax Questions-How to I file?
Please do not send the IRS links-I've searched these already. I'd like personal advice.
Info: I've been a home maker for the past three years with no income, and a dependant of my husband's. We file jointly, with three children, once a year (JAN). So, we've obviously adopted the Calendar Tax Year.
I worked two months this year as a substitute, had a baby and begin a family home day care in April. I have not profited from this business, yet. I've put back half for taxes and invested the rest into supplies and groceries. Would this be a short tax year (Apr-Dec)?
I assumed I needed to file quarterly as a small business or self-employed. After reading more IRS publications, it looks like I have to maintain my same tax calendar as last year. Now, I'm confused. Can anyone explain, without complicated IRS articles? I'd like to avoid penalties before June 15.
Answer: What the IRS likes for you to do if you are self-employed is pay estimated tax payments. I think the next one is due in Sept. If you have not made a profit yet then don't worry about it. If you make a profit before the end of the year then file the 4th estimated payment form, which is due in Jan '09. Since this is your first year in this business then even if you owe taxes they shouldn't charge you interest & penalties. Of course, they are the IRS and they will do whatever they want. When you file your taxes next year, for year 2008, you'll file a Sch. C and a Sch. SE. It's the SE that hurts. You have to pay 15.3% of 92.35% of your net income from the Sch. C. So, even if you don't think you'll owe tax you might owe from the Sch. SE. If you make less than $400 then you don't have to file SE. You can subtract half of the SE on the front of the form 1040. Be sure to keep receipts from any expenses you have for your business so you can write them off your taxes. If you drive places for your business you can deduct mileage. For 2008 it's 50 1/2 cents per mile. You'll still be filing on a calendar year even though you started the business in April. There's a box on the Sch. C that you check if you just started the business that year. If you think you will owe taxes to the IRS then you will probably owe to your state also, so check into making estimated payments to them. Here's a link to the estimated tax form for the IRS. http://www.irs.gov/pub/irs-pdf/f1040es.pdf There's a worksheet where you can try to figure out if you will owe taxes and there are payment vouchers you'll use if you decide to pay estimated payments. If you haven't made a profit yet then you should be fine but if you start making a profit as it gets closer to the end of the year then make the 4th estimated payment.
Winning in the Cash Flow Business TRUTH - Russ Dalbey
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