Forum Moderators: martinibuster
If you pay it, is there any kind of deductions on federal taxes for self-emplyee?
How do you pay it?
Thanks, I'm kind of new for all this...
Is AdSense your only income? If so then unless you are doing extremely well, it's unlikely you would end up paying much.
On the other hand if you are making good money you would probably need to make quarterly estimated tax payments. If you don't you get hit with interest and penalties.
Taxes are complicated and I suggest you get a basic guide at a bookstore to get you started. Many people have them done by accountants, but you can also do them yourself if you are patient and read up on the rules.
You can get a good software that is not expensive and gives you the rules as you follow along. Do your taxes as late as possible when you use one as it is typically updated with the newest rules and forms before finalyzing the return.
With one, I know of, you can file electronically and even helps you estimate taxes for the coming year.
By all means get you a book or go to your IRS office and pick up a copy of setting up a small business booklet. Tell the cleck what you need and she/he can give you everything you need to study.
Good luck and welcome to our world. :)
Ann
I will definitely buy some tool like TurboTax.
How do you pay it?
Don't worry about that, the government will get a hold of you. If you have to pay, you will find out soon enough.
I don't make a lot with AdSense but I do have to pay SS tax.
Estimated tax is paid by check and a paper is included (which IRS gives you) showing how much you need to send in for each quarter.
Ann
Ann
Ann wrote: "Usually paid by check. Estimated tax is paid by check and a paper is included (which IRS gives you) showing how much you need to send in for each quarter."
Which paper IRS will give me? I'm confused... Do I have to wait for IRS to tell me when and how much to pay?
Please advice.
Thanks!
I am up for adoption...:)
Usually the software I mentioned can offer you the option of computing your quarterly taxes for the coming year and you will be able to print out the forms from it. The forms will tell you the amounts plus the dates each payment must be sent by.
Good luck.
Ann
Where do I sign the adoption papers?
Sorry for a lot of questions... I'm new with all this stuff...
is there any kind of deductions on federal taxes for self-emplyee?
Sure, if you're running a real business. I keep my business accounts 100% separate (separate bank account, credit card, accounting software, computer, etc.). I can deduct all reasonable business-related expenses (computers, software, traveling to conferences, ISP bill, domain fees, office supplies, etc.).
I tend to avoid well-known red flags like the "home office" deduction, which wouldn't add up to much for me anyway (though, if I were ever audited and found wanting, I would certainly decide to retroactively claim that deduction). OTOH, I have not avoided the red flag of deducting computer purchases. I amortize them over the prescribed period.
If you're serious about being self-employed, you should invest the time to get familiar with this stuff. It's not rocket science, and tends to change only slowly year to year. Get a copy of "Small-Time Operator" by Kamoroff; it's the classic.
Unfortunately, I have no dependants so may consider taking in a few orphan children.
If you have $1,000 of self-employment profit, but end up with a negative taxable income (because of all your deductions not related to the business), you'll still owe taxes on that $1,000.
[edited by: LifeinAsia at 8:09 pm (utc) on Oct. 13, 2006]
I tend to avoid well-known red flags like the "home office" deduction
That one's a good one to avoid. The way it is currently set up, it will probably cost you more when you sell your house than you save in taxes.
The way it is currently set up, it will probably cost you more when you sell your house than you save in taxes.
As a former bookeeper/accountant I would strongly encouarage you to consult with a CPA or an EA (Enrolled Agent) at least initially. It's very important *not* to avoid the IRS! By the time they catch up with you, you may owe penalties and interest in addition to the regular self-employment taxes (social security & medicare).
If you are comfortable using a program like TurboTax and can keep your records reasonably up-to-date (at least on a quarterly basis) with Quicken or Quickbooks, then you will probably do just fine preparing the tax payments yourself. But I would highly recommend that you have a tax professional at least help you get set up and started with the process. They can advise you on what you need to track, keep records of, and for how long. In addition, they may be able to recommend some tax-saving strategies for the long haul.
There's no need to panic if you have just started earning AdSense income, but you definitely should take a pro-active approach to getting organized and prepared by the end of the year. Hope this helps!
Quite frankly this is what the IRS hopes for, they do a few high profile terrorist like tactics against some self employed individuals and bingo, people are scared to death of this deduction, creating an instant tax increase for your favorite uncle.
When I asked my CPA this very question he told me that just being self-employed was a HUGE red flag to the IRS in the first place and just by this alone you were under increased scrutiny so why not take all the legal deductions you are entitled to. I take them all and keep excellent records and a good accountant to call on, just in case.
Fortune Hunter
But seriously,
If you create a little business the business can pay you a salary - say $30K. Everything the business makes above that will not be charged SS + medicare taxes. (You get the profits right in your pocket).
Sincerely,
#8977555
San Quentin, Rm 301
My financial planner put this plan in place for $100 bucks per year through Oppenheimer funds. If anyone is self employed and makes any real amount of money doing this they should have one of these and max it out every year. After all every dollar contributed lowers your taxable income by the same dollar amount. For self employed people that is like having uncle sam finance your retirement for you! I can't think of too many things better than that.
Fortune Hunter
